SMITHS CITY REPORTS STABLE TRADING RESULT
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Smiths City Group Limited (SCY) | 12:32 pm, Friday 27 June 2008 | SCY | 0.310 |
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The Directors of Smiths City Group Limited, the listed Christchurch based
retailer, have announced an operating surplus after taxation for the year to
April 2008 of $3.562million compared with $3.624million last year - a
decrease of 1.7%.
Operating revenues for the year decreased from $271.9million to $252.4million
- a decrease of 7.2% - reflecting the sale of the Christchurch based building
supplies business. Same stores sales revenue in the year decreased by 2.2%.
The Directors have declared an unimputed final dividend of 3.0cents per share
(last year 4.0cents unimputed) to be paid on 15 August 2008. The lower
dividend reflects the need to be prudent in regard to cash reserves in
difficult trading conditions. For the purposes of the dividend the share
register will close at 5.00pm on Friday 8 August 2008 and reopen at 9.00am on
Monday 11 August 2008.
The summary of consolidated results is as follows:
12 MTHS 12 MTHS
30.4.08 30.4.07
$000 $000 INC/(DEC)
TOTAL OPERATING REVENUE 252,407 271,873 (7.2%)
Operating Surplus From Trading 3,457 3,588 (3.7%)
Share of Earnings From Associate 105 94
PROFIT BEFORE TAXATION 3,562 3,682 (3.3%)
Less Taxation - -
SURPLUS AFTER TAXATION 3,562 3,682 (3.3%)
Less Minority Interest - (58)
OPERATING SURPLUS 3,562 3,624 (1.7%)
The financial result has been prepared in accordance with New Zealand
International Financial Reporting Standards (NZIFRS) for the first time. The
change to NZIFRS reporting has resulted in prior year comparatives being
restated. However, the net effect on reported profit when compared with
reporting under the previous standards is immaterial. Along with the
adoption of NZIFRS the Board has decided to change its reporting in that all
supplier product rebates are now included in the total cost of goods sold
rather than taken to revenue as in previous years.
Commenting on the result, Chairman Craig Boyce said "Retail trading
conditions over the last two years have been challenging and the period since
Christmas 2007 particularly difficult as household budgets have come under
extra pressure from the continually increasing costs of food, electricity,
petrol and interest. In conditions such as these it is acknowledged that big
ticket products - kitchen appliances; furniture; flooring etc - are among the
first items to be cut from discretionary household expenditure. Given these
very difficult trading conditions a profit result basically in line with last
year is considered satisfactory.
Under these trading conditions businesses like Smiths City need to:
- Maintain market share and remain important to major suppliers in
buying and promotional support.
- Grow to access the advantages of branding, marketing and promotion
available to a nationwide business.
- Reduce direct costs of sale and distribution per transaction
particularly in times of falling price points.
- Adopt new technology to improve efficiencies, and
- Attract and retain the high level skills and management necessary to
succeed.
Working towards these aims the company, during the year, has:
- Joined NARTA, the appliance buying group, to work closely with
suppliers in providing them with a single point of contact for dealing with
smaller appliance chains.
- Purchased the 20% minority shareholding in L V Martin, thereby
enabling rationalisation of systems to reduce costs across the Group.
- Implemented new point of sale technology to speed up the sale
transaction and improve customer service.
- Concentrated on cost out across the Group thereby adjusting its cost
base to offset the negative effects of the current sales and margin
environment.
- Divested/closed non core activities including selling the Smiths City
building supplies business.
These moves will give further benefits in the coming year and we are
confident that our business model will be successful regardless of how
difficult trading conditions become."
Managing Director, Rick Hellings said "The focus for management in 2008 was
to improve efficiencies, eliminate waste and ride out the effect of very
difficult trading conditions without seeing any erosion of profit. In
particular the aims were:
- To maintain market share in our established markets.
- To continue the Group's growth strategy into the North Island,
and
- To maintain a real focus on costs in all areas of the business,
particularly using technology to improve efficiencies.
To maintain market share we have matched, and in some cases beaten, very
competitive offers in the market place. Smiths City and Powerstore have
performed well in those trading conditions although the L V Martin business
experienced some erosion of margin and profitability as a result of the
increased number of shop fronts selling appliances in Wellington. As new
stores open it is not unusual to see established retailers lose market share
in the short term and it is pleasing to see the L V Martin performance
beginning to improve as their traditional customer base returns to them.
Finance is a key part of our customer offering and Smithcorp Finance Limited
continues to contribute positively to our result.
Property also contributed positively to our result - the purchase,
development and sale of our new store in Gore, which was completed in the
first quarter of this financial year is a clear example of how we can
successfully identify and develop store locations profitably. As noted in
our Half Yearly Report we enjoy additional funding lines to enable us to take
advantage of similar opportunities as they arise.
Looking ahead it is difficult to see any real change to the overall economic
environment. Whilst tax cuts and a strong rural economy would ordinarily be
in our favour this government appears determined to control inflation through
stifling any growth in consumer spending. As a result we are unlikely to see
growth in demand but will continue to see increases in costs such as fuel,
interest and rentals.
The North Island expansion is progressing in a stepped manner, reflecting the
current trading environment. We are seeing improving returns from the North
Island Smiths City stores and will continue our slow but steady advance into
the North Island by opening a new store in Bethlehem, Tauranga in July this
year.
Whilst acknowledging that the current retail conditions are very challenging,
we will continue to seek ways of minimising costs and maximising margins. In
addition we are looking for our association with NARTA, combined with our
strong relationships with our suppliers, to enable us to buy better. Under
these circumstances and with the continuing support of our people we look
forward confidently to 2009."
RICK HELLINGS
MANAGING DIRECTOR
SMITHS CITY GROUP LIMITED
For further information please contact
Rick Hellings
Telephone 039833011 / 0299833011
