Briscoe half year profit rises 58pc to $9.6m

By NZPA

Thursday 29th August 2002

Discount retailer Briscoe Group Ltd today reported its half year net profit to July 31 had risen 58.5 percent to $9.62 million from the same period a year ago.

The company, whose share price has rocketed ahead 15 percent this week to new highs, was in very confident mood. The shares were up 5 cents to $2.80 shortly after the result announcement.

"Barring unforeseen circumstances, the directors are confident that the sales growth experienced in the first half will continue in the second six months and that the after-tax profit projected in the group's December 2001 Prospectus of $17.746 million will be "far exceeded".

The directors said they remained confident that the company's policy of concentrating on specialty high-profile, high-margin brands across both Briscoes Homeware and Rebel Sport is working well. This strategy will continue.

The share price has been driven up largely by enthusiastic small shareholders. Some brokers believe the stock has been overbought. JB Were said it puts a valuation on Briscoe well south of the current price.

The company declared a fully imputed interim dividend of 2.75 cents which will be paid on September 27 to shareholders registered on September 13.

The profit was earned on sales of $128.1 million, which was up 14 percent on the same period last year.

The profit before tax and unusuals rose to $14.2 million from $9.01 million.

The company said the "strong" first half performance was underpinned by the ongoing refurbishment programme at the Briscoes Homeware stores, as well as a good customer response to the group's promotional initiatives at both Briscoes Homeware and the Rebel Sport stores.

Gross margins for the period increased to 31.7 percent from 30.9 percent for the first half of last year.

"This reflected, in particular, improved inventory management over the 2001 summer holiday period and consequently a reduced need to discount surplus stock in the half year just completed."

Other key factors contributing to this increase were improved buying conditions and the appreciation of the New Zealand dollar against the US dollar, which is the group's main purchasing currency.

Trading conditions were favourable throughout the trading period.

In the period under review, sales at Briscoes Homeware increased 16.5 percent from to $91.41 million and sales at Rebel Sport increased 8.7 percent to $36.68 million.

There was no increase in the number of stores compared to the first half of last year. However, total floor area for Briscoes Homeware increased from 56,073 square metres to 56,382 square metres, as the division relocated its Porirua and Hamilton stores to new premises.

The company said it was making good progress on the rollout of Rebel Sport stores. In total there were a further six stores in the pipeline and at various stages of progress. The group is in advanced negotiations for new stores in Whangarei, Napier, Hastings, Nelson, Rotorua and Tauranga.

A heads of agreement had just been signed for a further Rebel Sport store, as well as a Briscoes Homeware store, in Lower Hutt.

These two stores are expected to be trading by June next year.

A new Rebel store in Invercargill is trading ahead of expectations.

New Briscoes Homeware stores planned for Invercargill and Whakatane are to be completed by Christmas.

The company said its balance sheet had strengthened since the public float last year.

At July 31, the group had cash in the bank or on deposit of $34.121 million, and no borrowings.

Inventory levels were $43.3 million and accounts payable were $23.6 million (compared to $35.6 million and $16.9 million respectively a year ago).

Timing changes had a related negative impact on the reported cash flow from operations for the period, which should be reversed in the second half of the current year, the company said.

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