Shares in Solomon Lew’s Premier Investments rose sharply yesterday to continue the strong surge since it’s recently taken over Just retailing business revealed its full potential in a guidance update on August 10.
That update was confirmed yesterday and the shares closed at $8.15, around $2 higher than what they were back in early August.
Earnings almost doubled after thanks to Just reporting those better-than-expected results.
Net profit rose to $82.7 million for the year ended July 25, compared to $41.8 million in the 12 months to June 30 2008, after the Melbourne-based Premier changed its annual reporting date.
Sales for the year rose 4% to $844.9 million.
Back on August 10, Premier said sales rose 4% to $845 million, thanks to a strong second half surge of 6.3%, which offset a negative first half.
"Premier now expects Just Group’s EBITA contribution to Premier will be within the range of $94m to $96m," Premier said.
Yesterday’s statement revealed that EBITA was up 3% on the previous corresponding period to $95.3 million. Second half EBITA was $39.4 million, an increase of 39% on the previous corresponding period.
Premier declared a final dividend of 38 cents a share, taking the full year payment to 75 cents.
"This dividend comprises an ordinary dividend of 18 cents per share and a special dividend of 20 cents per share.
"Therefore, Premier has declared total FY2009 dividends of 75 cents per share, again demonstrating its commitment to capital management.
"The combination of Just Group’s solid result and the board’s commitment to capital management initiatives means that investors on Premier will have had the opportunity to receive up to 75 cents per share in dividends," chairman Solomon Lew said.
Premier said Just Group’s trading for the first seven weeks of the current fiscal year had been in line with the improving trend of the second half of fiscal 2009 and was ahead of budget.
The company said the current retail environment appeared to be gaining strength, but Premier would remain cautious and conservative in its outlook.
"While we have seen some improvements in consumer confidence in the past few months, we are cautiously optimistic about the year ahead," Mr Lew said.
"It is our view that retail conditions will continue to be uncertain with the possibility of increased unemployment, potential increases in interest rates and potential risks associated with housing valuations which would pose real challenges for consumers."
Premier’s earnings per share rose 35% to 62.44 cents.
The company said it had $328.7 million in cash reserves and no Just Group refinancing commitments until 2012.
"Just Group has produced a solid result during tough retail conditions,” Mr Lew said in the statement.
"While we always knew trading would be tough, today’s result is a testament to the strategic review we have put in place and the dedication of the Just Group management team.’
"Premier forecasted the economic downturn and its impact on consumer spending in April 2008, prior to the acquisition of Just Group.
“The challenge now is to help Portmans and Jacqui E perform at a consistently high standard alongside other brands in the portfolio.
"As part of the review, the Board of Premier and the Just Group management team have had to make some tough decisions to protect shareholder value.
"The Premier Board always had concerns about the viability of the Peter Alexander retail business in the USA and, in June 2009, a decision was made to close the Peter Alexander USA Retail Operations.
"The brand maintains a very strong presence in Australia and New Zealand.
"On acquiring Just Group, Premier made significant provision for costs in relation to the Peter Alexander USA business, so the closure has not adversely impacted Premier’s FY2009 profit", the company said.
And not a word about the biggest factor that influenced the result, the $20 billion or more in spending stimulus injected into the pockets of consumers by the federal government during the year, and especially in the second half.
As we have seen by JB Hi-Fi, Westfield’s Australian malls, Woolworths (especially Big W) and Harvey Norman, the retailing sector was the major beneficiary of the stimulus payments from Canberra.
No doubt there are plenty of people opposed to the spending who are sticking their hands out to accept the higher dividends from the likes of Premier, Woolies and JB Hi-Fi.
