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SP Apparels: Brexit Hampers Sales Growth - Views on News from Equitymaster
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SP Apparels: Brexit Hampers Sales Growth
Aug 28, 2017

SP Apparels announced its results for the first quarter ended June 2017 (1QFY18). While revenues fell by 7% YoY, net profits were also down by 4% YoY.

Performance summary
  • Revenues fell by 7% YoY during the quarter. While revenues in the garment division declined by 5% YoY, those in the retail division were down 1% YoY.
  • The fall in the garment division revenues was attributed to foreign exchange translation loss on account of Pound and Euro currency depreciation. This was especially so because of Brexit. Retail revenues were subdued on account of GST related issues.
  • Operating profits declined by 32% YoY as margins shrank by 4.5% to 12.5% during the quarter. This was largely due to higher raw material and staff costs (both as a percentage of sales).
  • However, the 4% YoY drop in net profits was not as steep because of higher other income and lower interest costs. Other income increased thanks to gains on account of foreign exchange fluctuations. Reduction in interest costs was driven by repayment of debt.
Consolidated financial snapshot
(Rs m) 1QFY17 1QFY18 Change
Net sales 1,622 1,506 -7.2%
Expenditure 1,347 1,319 -2.1%
Operating profit (EBIDTA) 276 188 -31.9%
Operating profit margin (%) 17.0% 12.5%  
Other income 21 105 408.0%
Depreciation 44 54 22.0%
Finance costs 76 67 -12.0%
Profit before tax 176 171 -2.6%
Tax 61 61 0.0%
Profit after tax/ (loss) 115 110 -4.0%
Net profit margin (%) 7.1% 7.3%  
No. of shares (m) 25.2 25.2  
Diluted earnings per share (Rs)*   22.5  
P/E ratio (x)   17.3  

* on a trailing twelve months basis

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