Friday 17th February 2012 |
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Struggling clothing, footwear and homeware company Pacific Brands' first-half loss widened after it wrote off goodwill in its underwear business and sales fell 20 percent.
The Melbourne-based company, which owns the Stubbies, Berlei, Bonds, Dunlop and Sheridan brands among others, made a loss of A$362.4 million in the six months ended Dec. 31, from a loss of A$166.1 million.
Pacific Brands said net profit before significant write-offs fell 38 percent to A$35.7 million. The bottom line included the A$388.7 million write-off of goodwill booked for the underwear division when the company floated in 2004, raising A$1.25 billion.
Underlying sales were down 7.4 percent. Excluding sales though K-Mart, which last year decided to stop selling branded goods including Pacific Brands' star performer Bonds, sales were down 2.9 percent.
The rest of the sales drop was due to the sale or exits from businesses such as Sleepmaker and Dunlop Foams.
“As expected, sales performance was impacted by difficult trading conditions and the K-Mart transition,” chief executive Sue Morphet said in a statement. “We have partially mitigated the impact of the increase in the cotton price on margins and managed our cost base while maintaining strong cash flow.”
Bonds sales were up excluding K-Mart, workwear sales driven by the KingGee brand were flat despite falling business confidence and the Sheridan brand is doing well, she said.
“The write-down of goodwill in the underwear business is disappointing but a necessary step to reflect the impact of trading conditions and other factors on the business' performance and outlook,” Morphet said.
Last month, Pacific Brands said it’s in takeover talks with KKR, amid reports the US private equity firm made an offer worth A$600 million.
The company’s underwear division's sales dropped 16 percent to A$217.3 million and its earnings before interest and tax (EBIT) before write-offs fell 40.6 percent to A$35.4 million. About two-thirds of the sales decline reflected the loss of K-Mart sales.
The workwear division's sales fell 1.1 percent to A$194.5 million with EBIT down 14.1 percent to A$18.4 million and the homewares, footwear and outerwear division's sales fell 31.2 percent to A$272.9 million, mainly due to divestments, and EBIT fell 39.7 percent to A$17.6 million.
Morphet said the outlook remains challenging and second-half EBIT and net profit before write-offs are expected to be “materially down.”
Second-half underlying sales will be down due to weak retail conditions and changes to its customer base.
Pacific Brands will pay a fully-franked first-half dividend of 2 Australian cents per share, down from 3.1 cents the previous year.
While dual-listed in Australia and New Zealand, Pacific Brands trade mostly on the ASX where they ended at 66 Australian cents yesterday. That's up from their low at 50 Australian cents in November but the shares have been trending lower since hitting A$1.52 in October 2009. The 2004 float price was A$2.50.
BusinessDesk.co.nz
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