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Kresta has finally unveiled the results of an operational and strategic review as well as its half year results to June 30 2018 after placing itself in a trading halt for three and a half months.
The company recorded a 26.75% drop in revenues for the six months to June 30, recording $28.2M in sales from the Kresta business ($16.25M) and the Curtain Wonderland readymade business ($11.98M).
As a result, the company recorded a net loss for the period of $14,266,000 which compared with a net loss of $1,886,000 for the comparative period last year.
In a release to the ASX dated 20 December 2018, Kresta attributed much of the loss to one off impairment items, however having removed these, the trading loss still amounted to around $8M.
As a result of the loss, the Group has extended its loan facility of from SunTarget (HongKong) Trading Co., Limited from 31 December 2018 to 31 December 2019 and on 22 November 2018, the Group received a letter of support from Ningbo Xianfeng New Material Co., Ltd (“Aplus”) and Suntarget (Hong Kong) Trading Co., Limited.
On 23 November 2018, the Group has entered into a payment deferral agreement with Ningbo Cathayan Weaving MFG Co., Ltd and Ningbo Mardo Import & Export Co., Ltd. The agreement is to defer payment of debt for all invoices dated May 2018 to May 2019 by one year based on the current six months trading terms.
Notes to the consolidated financial statements said that should the Group be unable to improve its performance there is material uncertainty as to whether the Group will continue as a going concern.
STORES TO CLOSE
The release of the results coincided with the release of an operational and strategic review “designed to enhance shareholder value.”
Amongst the recommendations made by retail expert Roy Sammartino the company will reduce its retail footprint with at least nine stores to close by 1 July 2019.
“The Board and management team has also reviewed the company’s retail footprint and identified a number of lossmaking stores,” said Kresta Chairman Xianfeng Lu in a statement.
“As part of the process to implement the strategic review outcomes, the company will evaluate the feasibility of rationalising its retail footprint and closing loss-making stores.”
“The Company anticipates this action may result in a reduction of its retail store footprint by approximately 10 to 15 percent.”
Kresta will also overhaul its organisational structure including the recruitment of Group HR Manager, consolidation of financial and payroll teams in the Company’s head office in Western Australia and the leasing of underutilised facilitates.
Two directors have also resigned whilst the company was in a trading halt: Sean Shwe and Jin Lan Quan.
GROWTH PLANS
Also detailed in the strategic review was the unveiling of the company’s Krestec System.
“The Company has developed the Krestec System, a custom designed proprietary software solution to streamline its sales, ordering and fitting processes,” Lu said.
“Krestec System operates on in-store tablets and desktop systems throughout the business. It enables quotes and custom measurements from sales consultants to be communicated directly to the Company’s ordering and supply channels, minimising traditional paperwork and back-office communications. The Company anticipates the Krestec System will enable customer orders to be processed two to three working days faster than before.”
“This will transform the Company’s operational systems, eliminate manual data entry errors and streamline the whole business process.”
The company has spent $128,000 on the system and plans to roll it out nationwide.
Whilst reducing its retail footprint, the company plans to expand its sales force for the custom-made window furnishings.
“In conjunction with an expanded sales team, the Company has implemented new incentive programmes aimed at improving staff effectiveness.”
“Starting from November the Company has already recorded significant sales improvement from the new sales force, and it projects these initiatives will drive an increase in revenue of $3 million to $4 million in the next 12 months,” Mr Lu added.
