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Tougher year for Bendon

By Phil Boeyen, ShareChat Business News Editor

Wednesday 30th May 2001

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Earlier warnings of a tough operating climate for lingerie company Bendon (NZSE: BEN) have been vindicated in the company's full year result.

Although bottom-line profit for the year ended March of $23.26 million was well up on last year's $1.4 million loss, the figure included a profit of $28.35 million on the sale of its China Clays business.

In February Bendon warned that due to a tough market in Australia and competitive trading in New Zealand it had forecast a 10-15% drop in EBIT before non-recurring costs compared with last year.

The full year results show apparel revenue in New Zealand rose to $37 million compared with $34.3 million last year but in Australia sales fell to $41.09 million from $43.5 million previously.

EBIT before non-recurring items was $5.336 million for the year compared with $6.213 million last year, a drop of around 14%.

Despite the drop Bendon claims its EBIT to sales ratio of 6.8% compares favourably to benchmark data for international apparel companies.

The company says after a full year of sourcing its entire product offshore it is apparent that this was the right decision.

"Without the competitiveness and flexibility gained from offshore sourcing, Bendon would not have been as successful as it has been given the significant downturn in retail markets during the second half of the financial year," Bendon says in a statement.

New Zealand sales are reported to have benefited from twelve months revenue from the Bennett and Bain stores acquired last year, and the re-launch of the Fayreform brand in the local market.

The company currently holds 50% of targeted market segments in New Zealand and 25% in Australia but believes that further market share growth in both countries will be difficult and it is looking to new opportunities, such as the United Kingdom.

It says it has already received orders from major UK department stores for delivery of the Elle Macpherson range, and these are due in stores in August/September.

Non-recurring costs in the 2001 accounts for entering the UK market have been put at $1.2 million although any boost to profitability from the UK is not expected to show up until the financial year ended March 2003.

Bendon says it has now restructured its business to operate profitably in the current market environment and is poised to take advantage of any rebound in the markets but admits any further downturn in the Australian economy will adversely affect business in the new financial year.

A fully imputed dividend of 4 cents per share has been recommended.

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