Briscoes float invites Harvey Norman on to share register

By Chris Hutching

Friday 23rd November 2001

The $40 million Briscoes share issue will provide an opportunity for founder and main shareholder Rod Duke to sell down some of his interest in the retail chain to fellow directors.

The R A Duke Trust owns the 170 million existing Briscoes shares and will sell 5.25 million of them to Gerry Harvey and Harvey Norman Ltd, and two million to two trusts associated with finance director Alaister Wall and group executive Patricia Huang.

If the issue is fully subscribed there will be 210 million shares on issue with 75% held by Mr Duke's trust, 6% held by directors, and 19% held by clients of sharebroker J B Were which has rights to allocate the new shares ahead of Stock Exchange listing on December 14.

About $10 million of the money being raised will be used to expand the Rebel Sports subsidiary chain, about $3 million on modernising Briscoes Homeware stores, other expansion opportunities and repayment of a shareholder loan of $9 million.

According to financial director Mr Wall the $9 million loan relates to a device set up when the government raised tax on top incomes.

"Two years ago when the government changed the tax regime to tax higher incomes the decision was made to pay out retained earnings as dividends to Rod's trust to stop the tax going from 33-39 cents in the dollar.

"That money came back to the company as a loan so now we're paying that loan back to Rod's trust," Mr Wall said.

Other calls on capital in the near future include a $A3 million payment in 2003 to continue a franchise arrangement until 2005 with Rebel Sports Australia, which is 54.9% owned by Harvey Norman.

The role of Harvey Norman controlling shareholder Gerry Harvey on the Briscoes board came about when he was invited to join because of his retail experience, Mr Wall said.

Mr Harvey was keen to buy a significant stake. But the connections go back further to 1988 when Mr Duke, the then managing director of Australian retailer Norman Ross (whose principal was a founder of Harvey Norman), was appointed to turn around the fortunes of Briscoes and prepare it for sale.

Instead, Mr Duke bought the group in 1990.

During the 1990s he struck the franchise arrangement for Rebel Sports in this country.

Now the Briscoe Group retailing interests total 28 Briscoes Homeware stores and 11 Rebel Sport stores.

Investors who take up the $40 million share offer will be investing in the cash flow and brand strength of the retail chain whose stores are leased.

The freehold interest in the Panmure outlet is owned by Mr Duke.

Briscoe Group is forecasting a significant increase in revenue and profitability over the next two years with operating costs forecast to increase from the $221.1 million posted for the year ending January 2001 to $252 million for the year to January 27, 2002 and to $266 million for the year to January 26, 2003.

Profitability is forecast to grow from $12.5 million in the 2001 year, to $15.1 million for 2002 and $17.7 million for 2003.

Respective contributions from the two chains see Briscoes Homeware growing revenue from $158.3 million currently to $176 million in 2002 and $184 million in 2003.

Rebel Sport revenue is forecast to rise from $62.8 million currently to $76 million in 2002 and $82 million in 2003.

The forecasts are based the existing number of stores.

The offer of $40 million shares at $1 each will open on November 22 and close on December 12.

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