PRG needs a Panadol for PowerHouse

By Deborah Hill Cone

Friday 9th July 2004

The just-filed Pacific Retail Group annual report reveals the company's headache-causing UK acquisition PowerHouse has signed up for lease commitments totalling $1.6 billion.

PRG is trying to turn around the almost bankrupt electronics chain which it bought last year and the latest accounts show it is committed for the long haul.

The report shows lease commitments under non-cancellable operating leases for PowerHouse total $1.6 billion, with most of that, $1.3 billion, stretching out longer than five years.

That compares to $83 million for PRG's other leases.

The PowerHouse chain has 134 stores with 106,000sq m of retail space while the New Zealand retail operation has 90 stores and 54,000 sq m.

The report says the PowerHouse figure is shown separately because it is of such "significant value," with some of the leases signed up until 2025.

"Leases of such length are normal in the market that PRG PowerHouse operates in," the company says.

Four of the Powerhouse leases, totalling $17 million, are guaranteed by PRG's parent company.

The annual report lays bare the amount of money being sucked up by PowerHouse $8 million every month confirming that PRG must continue to raise capital from issuing debenture stock, or from somewhere else, to keep the show on the road.

Last year, PRG reported a $22 million loss for the year to March.

The loss would have been $15 million higher if one-off items were not taken into account.

PRG owes $700 million in actual and contingent liabilities including $40 million to the ANZ bank (up from $20 million), $325 million to debenture holders (up from $160 million), $63 million to secured capital note holders, $117 million to unsecured trade creditors, as well as provisions of $59 million.

The report says the company is going ahead with plans for an IPO of its retail chains, Bond & Bond, Noel Leeming, Noel Leeming Furniture and Big Byte. But it is widely considered a trade sale is more likely, with the company said to be in talks with several interested parties.

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