Pacific Retail Group says the six-month loss for money-gobbling UK subsidiary PowerHouse could be $17 million worse than forecast.
The 128-store appliance retailing chain was now expected to lose $36 million to $39 million in the six months to September 30, PRG disclosed yesterday.
The listed Auckland company, owned mainly by Eric Watson, bought the UK retailer from its receivers a year ago for $47 million and PowerHouse has since swallowed a further $70 million.
However, acting PRG chief executive Steve Smith and chairman Maurice Kydd yesterday took the front foot, with an assault against market and media slaggings of PRG’s prospects.
They had a bundle of facts – including PRG’s $50 million in cash in the bank, and the strong trading of two key New Zealand subsidiaries – to highlight the company’s financial strength.
The company is also planning from next week to buy back PRG debt securities believed to be trading at unrealistically low prices.
The yields on the capital notes blew out from the 9.25 per cent of their issue in 2002 to as high as 14.75 per cent last month.
The immediate reaction yesterday was a drop in yields for the notes.
PRG said it expected an after-tax profit of $55 million to $60 million for the half year.
However, that includes an expected gain of $90 million-plus from the sale of the Noel Leeming and Bond & Bond group of businesses.
Some of the sale proceeds were used to cut core bank debt to $20 million and eliminate Pacific Retail Finance’s $14 million loan to PowerHouse.
In New Zealand, lingerie company Bendon was trading better than last year and PRG’s other main arm, a group of finance companies, was “considerably” ahead in profit, with revenue up 40 per cent.
The company said PowerHouse was forecast to break even in the second half of the financial year – rather than making the “modest profit” originally targeted.
PRG said PowerHouse was expected to improve in the next financial year and, finally, break even for the full year 2006/2007.
From The New Zealand Herald