The Directors of Smiths City Group Limited have announced an unaudited pre-tax profit from operations of $2.049million for the six months to 31 October 2006 – a decrease of 9.8% over the six months 31 October 2005.
Total operating revenue for the period increased 16.3%. On a same stores basis sales increased 4.4%
The Directors have declared an un-imputed interim dividend of 1.5cents per share (last year 1.5cents per share). For purposes of the dividend the share register will close 5.00pm Friday 2 February 2007 and reopen 9.00am Monday 5 February 2007 with payment being made on Friday 9 February 2007.
The summary of results is as follows:
Commenting on the result Chairman, Craig Boyce, said “The growth in sales over the first half is a good performance. We have commented for sometime, including in my address to shareholders at our Annual meeting in September, that trading conditions in big ticket are challenging. In simple terms price deflation and intense competition within the big ticket retail market, while helping sustain volumes, continues to lower margins.
Increases in interest and fees received has resulted in an improved result from the financing operations.
The property division result was down on last year where the result included a profit of $453,000 on the sale of the Ngauranga Gorge property in Wellington.
Looking ahead, we anticipate the second six months will be as challenging as the last eighteen months have proven to be. However, the Board has confirmed the company’s longer term growth plans, as we recognise that the current downturn is part of the business cycle.
As tangible evidence of these plans, in the last six months the Smiths City chain has moved to larger premises in Greymouth, moved from Mosgiel to larger premises in South Dunedin and opened a new store in Palmerston North. In addition, Powerstore has moved to more modern premises in Timaru and Alectra has substantially upgraded its building supplies premises in Rangiora.
In December Smiths City relocated to larger premises in Queenstown and Powerstore completed the purchase of Dunedin appliance retailer, Selectrix, enabling it to move to superior premises and capture a significant customer base.
The company will continue to investigate opportunities to expand its trading base whilst at the same time concentrating on improving returns from all its trading operations.
Managing Director Rick Hellings said “It is disappointing to see that highly competitive trading conditions have not enabled us to immediately take the benefits of increased sales to our bottom line.
The impact of higher interest rates, fuel prices, power prices and the softening building market continue to have an adverse impact in the big ticket market place. Retailers are responding by offering ever higher discounts and ever longer deferred payment options. Promotional offers in the market place in December are clear evidence of this.
Throughout the last six months we have responded to these conditions by matching offers in the market place. In addition we have concentrated on realising the synergies from recent acquisitions, lowering costs and maximising the benefits of the higher dollar by the direct importing of a wider range of products. We have also made amendments to the finance company to improve returns from this area.
November and December trading to date whilst ahead of last year is below our internal expectations primarily due to the cool weather slowing sales of summer products such as camping equipment, outdoor furniture, lawnmowers and barbecues. Given the increasing importance of the post Christmas trading period and the changeability of weather patterns it is too early to predict the outcome of the Christmas trading season.
The company will continue to promote aggressively to protect its retail base, actively pursue profit opportunities through both finance and properties and implement the longer term growth strategy put in place by the Board in 2004.