Clothing retailer, Just Group, saw demand for its shares yesterday after reporting a modest rise in first half earnings, the retirement of the current chairman and a $65 million share buyback.
The shares jumped more than 10 per cent or 40c to a high of $4.19c before easing to settle at $4.15. The 52 week high is $4.27.
Some of the improvement can be explained by the general firmness in the market for the second day running but investors liked the result for whatever reason.
Perhaps it was the news that instead of playing in the market, as JST did last year when it took a 4.9 per cent stake in Colorado, the company has changed tack and now believes shareholders can do better with the cash than the company.
Certainly there were more than enough questions left unanswered over the actual result.
The company yesterday revealed a nine per cent improvement in first half net profit to $39.7 million, on the face of it a good result seeing sales rose just over six per cent and pre tax earnings rose 4.8 per cent.
But that’s a bit misleading because the result includes a nice profit made on the play in Colorado and there was no sign of a profit figure given without the impact of this one-off item.
JST said the result was after Earnings Before Interest, Tax And Amortisation (EBITA) rose 4.8 per cent to $58.4 million (compared with $55.8 million in the first half of 2006). The company said that “The result includes a net gain of $2.6m arising from the strategic investment in Colorado Group which was sold during the period”.
Stripping out that one off profit there was no improvement in EBITA earnings as shown by the EBITA margin which eased to 15.16 per cent from 15.39 per cent. Not much, but not on par with some of its retailing peers in the half, such as women’s fashion group, Noni B which boosted sales and earnings.
Certainly retail sales were strong in the period covering JST’s first half. Official figures from the Australian Bureau of Stats showed a 7.2 per cent rise in retail sales in January this year compared to January 2006.
The flatness of the retailing performance can be further seen by the 6.4 per cent lift in sales to $385.2 million in the six months to January 27, compared with $362.2.
The company lifted the interim dividend 11.8 per cent to 9.5c a share from 8.5c, another sign the board felt shareholders needed sweetening and announced the buyback which will be around $65 million and be funded through cash and debt.
As to the second half the company said it was well placed to deliver a positive result for the full year and would continue to push ahead with investments that ensured sustainable growth for 2008 and beyond.
Just Group managing director Jason Murray said the company would focus during the second half on stock management, repositioning of key brands and continued store roll-out.
“Improving consumer confidence, with stable interest rates and lower petrol prices, should support second half sales and we expect the relatively high Australian dollar to help sustain margins in the casual wear businesses,” Mr Murray said.
No sign of a guidance figure and the mention of 2008 might lead shareholders to think the rest of 2007 was being written off as no better than last year.
The off-market tender buy-back of approximately $65 million will be completed in early May 2007 and the ultimate size of the buy-back will be dependent on shareholder demand and market conditions at the time, “subject to a maximum of 10% of Just Group’s outstanding shares”.
The managing director of Just Group, Mr Jason Murray, said that this is a further demonstration of Just Group’s focus on maximising returns to shareholders.
And the chairman of Just Group, Mr Jonathan Pinshaw,announced that he intends to resign as chairman and as a director of the company at a date to be determined. The board of Just Group have appointed Dr Ian Pollard to be the chairman elect, the date of appointment to be the date that Mr Pinshaw resigns.
Mr Pinshaw said that he “wishes to focus on his private company interests and would step down once a director with suitable retail experience has been found.
“The board has today commenced a process to identify and appoint one or two new directors to the board. Dr Pollard joined the board in March 2004 and is currently the Chairman of the Just Group Audit and Risk Committee.
He is also currently Chairman of Corporate Express and a director of Milton Corporation and was, until recently, a director of DCA Group which he founded in 1984. He is a Rhodes Scholar and holds a Doctor of Philosophy in finance.”
