Pacific Retail Group (PRG) is confident it can bring the recently acquired British appliances retailer Powerhouse to break-even point during the current financial year.
The PowerHouse purchase helped drag down PRG’s net income from a profit of $18.2 million last year to a net loss of $22.6 million for the year ended March.
Powerhouse was in receivership when PRG paid around $48.2 million for it in September last year, but PRG is confident about its future.
The confidence seems to have rubbed off on investors, with the share price rising 10 cents to $2.21 yesterday.
PRG’s earnings before interest, tax and amortisation (ebita) was a loss of $2.1 million. But excluding PowerHouse, the group’s ebita was up 32 per cent on the year-earlier at $44.3 million.
“While PowerHouse has negatively impacted our results this year, we have a clear view of where the business is going and believe it will be a positive contributor in the future,” said PRG chairman Maurice Kidd.
PowerHouse chief executive Peter Halkett said the company was pulling out all the stops to get to break-even as soon as possible.
“We’re hoping we are going to get to at least get to a break even `run-rate’ prior to the end of this calendar year,” he said.
He was hopeful the company would be breaking even on an annualised basis between September and December.
PowerHouse’s ebita for the year was a $46.4 million loss.
ASB Securities’ Stephen Wright said the next two half year results were likely to be distorted by PowerHouse’s losses, but once the company’s earnings stablise “all of a sudden the figures for Pacific Retail Group start to look very good.”
On PRG’s agenda for the current year is the sell-off of its major New Zealand retail chains, including Noel Leemings and Bond & Bond, and the downsizing of its struggling Living and Giving stores.
PRG plans to sell its major Pacific Retail Ltd (PRL) brands, including Noel Leemings, Bond & Bond, computer store Big Byte through an initial public offering (IPO). Shareholder approval for the float will be sought in July.
Although the group overall reported a loss, PRL posted ebita of $19.4 million, on gross operating revenue of $479.2 million which was up 3.4 per cent on the previous year.
“One never knows if the strategy is to sell out of this while it’s had a good year just in case the whole thing collapses. Or do they really think that the prospects are so good in the UK that they want to free up their capital down here and plunge it into the UK. Probably a bit of both,” Mr Wright said.
The group’s Living and Giving chain will not be part of the IPO.
PRG’s acting chief executive Steve Smith said the group hopes to return the Living and Giving chain to” a core base of profitable stores” this year at which point the group will review its position.
Mr Smith said store closures are planned and although numbers are not yet firm, the current 15 Living and Giving stores are likely to fall to around nine by the end of the current financial year.
From stuff.co.nz