Arthur Barnett claims big strides in merger

Press, 28 December 1988, Page 25

Arthur Barnett claims big strides in merger

PA Dunedin Arthur Barnett says the decision to acquire the larger and unprofitable DIC chain was not taken lightly, but it has made big strides in merging the two companies and is optimistic about the current year. In the company’s annual report, the managing director, Mr Neville McAdams, said the acquisition increased turnover from $3O million a year to SI2OM, without increasing the capital. The directors and management had been considering buying DlC’s South Island stores for some years but when the opportunity arose to buy the whole chain “we took the challenge.” The company now had to try and earn a reasonable net profit on the additional sales.

“If this can be done the potential return to shareholders could be significant,” Mr McAdams said. Mr McAdams said the 16 DIC stores between Wanganui and Invercargill were generally well located. Their character and merchandise were now being changed to reflect the Arthur Barnett philo-

sophy of trading, wtucn included selling such items as haberdashery, dress fabrics, wool, and toys. ‘The merchandise is being changed from fashion store image to family store image,” he said. The successful Curtain Call operation had been introduced to Auckland and Christchurch and there had been cost-cutting moves already, including the merging of the two head office structures. The over-all benefits of restructuring should be reflected in the 1989-90 financial year, Mr McAdams said.

The DIC stores had been plagued with a credit card which had fuelled much customer dissatisfaction.

There were reduced sales as the chain was switched to the private Club Card but the Arthur Barnett card had been successfully introduced to the South Island. The company had experienced difficult trading and turnover did not reach expectations. The rural areas, particularly Southland and the East Coast, had been sadly

affected and Alexandra suffered from the Clyde Dam strike. However, the Alexandra store’s refurbishing had been justified by recent above budget sales.

Mr McAdams said continued high interest rates, high unemployment and low confidence gave consumer spending an uncertain outlook.

It was difficult to predict any immediate improvement in retail spending in the current year but the company was well placed to meet the challenge of the years ahead. As previously reported, turnover increased from $32,929,000 to $91,406,000.

There was a trading loss of $1,386,000 compared ’ with the previous year’s $1 116,00 profit and an after-tax profit of $195,000 ($1,552,000). The consolidated surplus for the year, including unrealised gains, was $852,000 ($4,497,00). Group assets employed rose to $46,555,000 ($26,370,000) but shareholders’ equity fell to 40.3 per cent from 70.4 per cent and asset backing per share to $3.65 from $4.22. A 6c final dividend is recommended, making a total of 12c. The annual meeting will be held on February 9.