Aussie costs weigh down Hallenstein Glassons

By Phil Boeyen, ShareChat Business News Editor

Thursday 4th April 2002

Growing pains in Australia are dogging Hallenstein Glassons (NZSE: HLG) with the company reporting a reduced profit for the first half.

The company recorded a net profit of $5.8 million for the six months to February 1 and says the 3% fall over last year reflects a disappointing season across the Tasman.

"Sales revenue in Australia, despite growing in total 3.4%, fell short of expectations, which meant insufficient revenue was achieved to cover added costs associated with new store openings and with building an appropriate infrastructure to support the business," the company reports.

"The move into the Australian marketplace has reached a stage where the group has to establish an Australian based executive team and distribution capability for future growth, and some short term negative impact on profitability is to be expected."

However the company says sales in Australia since have shown a pleasing improvement since balance date and it is looking to consolidate the trend before opening additional stores.

Total sales revenue for the period was 5.32% higher at $88.2 million with New Zealand sales climbing 5.5% and net profit up by 10%.

"In particular, the trading months of December and January were strong, which ensured that end of season inventory levels were well controlled."

HBK Girl and Glassons are reported to be performing well and Hallensteins is "consolidating its market position."

Positive cash flow means the company is maintaining its interim dividend of 9 cents per share but has once again warned that "future recommendations as to dividends will continue to be based on the trading performance and financial strength of the company, and any growth opportunities it may be pursuing."

Looking forward the company says the New Zealand economy should provide a stable platform for sustained growth.

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