Pacific Retail presents strong half-year

By Phil Boeyen, ShareChat Business News Editor

Friday 14th December 2001

Interim profit at Pacific Retail Group (NZSE: PRG) has more than doubled compared with last year as the company reaps the rewards of both expansion and tighter control.

The retail firm says after-tax profit for the six months ended September was $5.39 million, a 124% rise on last year's $2.4 million. Interim sales rose to $212.6 million from $198.4 million previously.

In line with previous years, no dividend has been declared.

CEO Peter Halkett says a variety of factors helped to deliver the improvement.

"Appliance store development, better stock and supplier management, along with reduced costs through improved distribution and logistics, have contributed to this performance.

"These initiatives, alongside work previously undertaken to improve basic retail systems and structures, are now delivering sustainable group profitability."

Mr Halkett says the company is now focussed on growth strategies, in a very competitive market, to develop the new brands in the portfolio, increase total retail space and implement new concepts like the contract manager scheme.

He says sales growth at Noel Leeming/Computer City, Bond and Bond and the newly launched Big Byte stores was steady and ahead of the 3% growth the sector experienced.

"This was a positive performance given the fierce competition during the period, which saw many of our competitors attempting to drive volume through heavy discounting.

"We avoided this approach and it is pleasing that our increased profitability and market share proved that this focus upon profitable, sustainable growth was successful."

PRG has opened six new Living & Giving gift and homeware stores since April and Mr Halkett says the business is well positioned for the critically important Christmas trading period.

Another division marked for expansion is the company's finance arm, Pacific Retail Finance.

The company says the division provides a big opportunity for growth as it expands outside its core role of supplying hire purchase finance to the appliance division and into the consumer finance sector.

PRG's stronger half-year result will give more support to an appraisal report released in October, which valued the company's shares in the range of $2.13 to $2.95. The report said the mid-point of $2.54, after allowing for a discount for minority holdings and lack of liquidity of 30%, implied an Ebit multiple of six.

Eric Watson's investment subsidiary, Logan Corp, launched a full takeover for PRG in October at $1.76. The offer was rejected by the independent directors but Logan did increase its stake by 10% to 71.4%.

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