Despite that shock update downgrading profit last month – a forecast that wasn’t met yesterday with earnings lower than forecast, Brisbane-based Super Retail Group (SUL) has boosted interim dividend.
Super Retail lifted its interim dividend 9% to 18.5c a share, payable April 3.
The news of the higher dividend overshadowed concerns about the less than stellar earnings and the shares added 4.1% to $11.30, while a surprisingly confident outlook for the rest of the year encouraged investors.
At one stage the shares were up more than 7% at $11.54 in the initial enthusiasm after the profit statement was released.
Super Retail management said the weaker sales and profit performance in the half came from rising costs, heavy investment in new stores and supply chain, weaker earnings from leisure retailing and especially profit margin-crimping increases in promotional spending at Christmas to try and motivate customers to spend.
As a result, net profit for the six months ending December rose only 1.7% to $61.6 million.
The result fell short of reduced market forecasts of around $62.6 million.
Earnings before interest and tax (EBIT) at Rebel Sport and Amart rose 5.5% to $38.4 million after like-for-like sales grew 5.5%.
In the core Super Cheap Auto division, EBIT grew 9.5% to $44.9 million and like for like sales were up 2.3%, down from the stronger 5.2% growth in the previous corresponding period.
But EBIT in the leisure business, which includes Rays Outdoor, BCF and FCO stores, fell to $24.4 million on like for like sales growth of just 1.6%.
Total sales for the group rose 5.8% to $1.09 billion.
SUL 1Y – Super Retail raises dividend
Chief executive Peter Birtles blamed the weak first half result short term internal issues, but he said the underlying business remained solid.
He said the overall group results "were in line with the projections announced on 17 January 2014 and reflected mixed performance across the Group’s businesses.
“The Auto Division has again delivered a pleasing result with operating profit close to 9.5% up on the prior period through their clear focus on gross margin management and cost containment.
"Operating profit in the Leisure Division was below the prior period as lower like for like sales growth was compounded by lower than planned gross margin.
"Like for like sales momentum continued to be very strong in the Sports Division which contributed to solid growth in operating profit over the prior period," Mr Birtles said.
Mr Birtles said the second half had started well for the Group, with solid sales growth and a focus on lifting gross margin.
“Like for like sales growth has been circa 2.5% in the Auto division, circa 2.0% in the Leisure division and circa 6.0% in the Sports division for the first seven weeks of the second half.
“We expect to deliver improvements in full year EBIT margin in our Auto Division and to maintain full year operating EBIT margin in our Leisure and Sports Divisions.
“We also plan to continue to grow and strengthen our store network, opening two Leisure stores and opening four and closing one Sports stores during the second half,” Mr Birtles said in yesterday’s statement.
