Solomon Lew’s Premier Investments (PMV) lifted underlying profit 10% in the year to July 26, and says it expects further growth as it continues to roll out its increasingly successful Smiggle and Peter Alexander stores.
The group made an underlying profit of $106 million for the year to July 26, up from $96.1 million a year ago.
But net profit fell more than 58% to $73 million, due to the previous $105 million reclassification of its stake in kitchen appliance maker Breville.
That stake was worth $264.9 million at July 26 (its book value in Premier’s accounts was $188 million), down from the $318 million at the end of the first half.
Premier has a 26% stake in Breville, which reported weak earnings for 2013-14 and the loss of its CEO.
But the value of that Breville stake has dropped since the end of July when it was around $8.25. Breville shares closed at $7.185 yesterday, down 3%.
That was the lowest Breville shares have been for around a year.
But investors ignored that problem and chased Premier shares higher all day in yesterday’s weak market.
By the close of Premier shares had risen 7.8%, or 77c to $10.60 in what was a very strong day of trading.
PMV YTD – Premier profit up 10%
Investors liked the positive comments from Mr Lew and the higher dividend which will see Premier paying a final, fully-franked, dividend of 20c per share, taking the full year dividend to 40c, up from 38c a year ago.
And then there’s the inflow of cash to come from the sale of Premier’s stakes in Country Road and David Jones. That will deliver millions of dollars of capital profits, and boost the existing cash pile of $313 million to more than half a billion dollars. Mr Lew sold his $212 million stake in David Jones and his $209 million stake in Country Road to South African retailer Woolworths, banking profits of $191 million.
Some analysts reckon that raises the chances of a capital return (which will boost Mr Lew’s already considerable fortune). Others say he will use the cash to launch a bid for the faltering Myer department store chain, but that raises the question why, when Premier’s own retail business is performing well.
Mr Lew said the performance of Premier’s core brands such as Just Jeans was improving, while the continued rollout of stationery chain Smiggle and sleepwear business Peter Alexander would help drive growth.
“Premier will continue to deliver sustainable long-term growth for shareholders by both optimising the value of our core retail brands and by unlocking the value of our uniquely-positioned growth brands, Smiggle and Peter Alexander,” he said in a statement with the results yesterday.
Smiggle grew sales more than 17% during the year, helped by its move into the UK market, where it has opened eight stores since February.
Premier says it plans to open a further 10 stores in the UK before Christmas (there’s a great irony here in that in these days of email, Facebook, etc and falling use of Australia Post and similar services, stationery chains such as Smiggle are doing very well).
The Peter Alexander chain lifted sales more than 21%, with eight new standalone stores and nine concession stores opened during 2013-14 trading year.
Premier’s retail arm saw topline sales grow 6.2% to $888.5 million and like-for-like sales grow a very solid 4.7%, and all seven brands in Premier Investments’ retail stable – Just Jeans, Dotti, Portmans, Smiggle, Peter Alexander, Jacqui E and Jay Jays – delivered like-for-like sales growth in the second half.
And the company’s major retail asset, Just Jeans, lifted total sales 7.8% in the second half.
Premier Retail’s CEO Mark McInnes said he was pleased with the progress against the group’s six-point transformation plan, which includes rejuvenating core brands, boosting gross margins through better sourcing, supply chain simplification, online expansion and growing the Smiggle and Peter Alexander brands. EBIT margins rose from 10% to 10.4% (10.4c in every dollar of sales).
