Smiths City sees better ahead

Press, 28 July 1989, Page 14

Smiths City sees better ahead

Smiths City Group, the Christchurch-based retailer, reported a loss of S6M for the year ended April 30, but the recently appointed group chief executive, Mr Craig Boyce, believes the company has now "turned the corner.” Sales were 14 per cent up for the year, but the beforetax loss deteriorated from $4.3M the previous year to $5.6M in the current year. The unaudited trading loss was $3.7M after tax credits. Extraordinary items of $2.323M made up the rest of the total loss.

Mr Boyce attributes the loss first to the decline in consumer spending, which was down between 20% and 30% on two years ago, 1986, and second to the costs of assimilating the Smith and Brown chain. Redundancies, the cost of disposing of obsolete stock, and holding surplus property were the main factors.

The final dividend will be passed, and there is to be a one-for-5 renounceable issue of 12 per cent convertible notes at 60c to strengthen equity and provide part of the money to repay maturing debentures.

Pressure on profit margins had been strong, the company reported to the Stock

Exchange. “In this very difficult market the company has increased profitability in the areas of specialist home appliances, do-it-yourself products and finance activities. The loss relates entirely to the Smiths City stores where, the considerable rationalisation and cost reduction which has taken place, was • not sufficient to bring about a turn around in the 1988-89 year. The result for the third quarter of the 1989 financial year was ahead of expectations, but the situation changed significantly in the fourth quarter when several

major financial announcements appearedd to have a negative impact on consumer demand. Of the current year, Mr Boyce said last evening that sales had risen in May and June, spurred by the July increase in GST. There was evidence of recovery in rural areas, but it was too soon to comment on how quickly this would spread to metropolitan areas and result in a demand for the group’s products. Appropriate action had been taken to reduce operating costs further and to improve margins, which would bring the stores back to profitability.

Smiths City Group: Unaudited result for year ended April 30 Current Previous Sales and other gross Operating revenues Period ($000) 311,411 Period ($000) 272,327 Abnormal items — — Profit before tax (5,674) (4,305) Income tax (not including tax on extraordinary items) (1,593) (3,269) Profit after tax (4,081) (1,036) Minority interests — — Equity earnings 381 123 Profit before extraordinary items . . . (3,700) (913) Extraordinary items (net of tax). . . . (2,323) (2,992) Profit after extraordinary .... (6,023) 2,079