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Smiths City first-half profit takes a dive

NZ Newswire logoNZ Newswire 20/12/2016 Paul McBeth

Smiths City Group, the appliance and furniture retailer, reported a 46 per cent drop in first-half profit as it faced new restructuring costs and a year-earlier gain on its Colombo St store wasn't repeated, even as underlying earnings and sales rose.

Net profit fell to $1.4 million, or 2.6 cents per share, in the six months ended Oct. 31, from $2.6m, or 4.8 cents, a year earlier, the Christchurch-based company said in a statement.

Stripping out $695,000 of restructuring costs and a $1.8m gain on a property sale in 2015, trading profit rose 67 per cent to $113.9m on a 7.2 per cent increase in revenue to $113.9m.

"Both margin and revenue improved on a same-store basis (7.7 per cent increase in revenue compared to the same period in the year prior and a pleasing 1 per cent increase in gross margin)," chief executive Roy Campbell said in his commentary.

Last month Smiths City said the acquisition of Furniture City, giving it a bigger presence in the North Island, underpinned the increase in sales, while also agreeing to new terms for its finance business.

The board declared an interim dividend of 1 cent per share, payable on Feb. 10 with a record date of Feb. 3, which will be fully imputed as the company uses up its remaining carry forward tax losses. That payment was unchanged from a year earlier.

The shares fell 1.4 per cent to 69 cents, and have gained 25 per cent so far this year.

The bulk of Smiths City's restructuring costs in the period came from changing the way its buying department operates to a category management approach, with inventory shrinking 20 per cent in the period.

The retailer anticipates more changes are needed and is introducing a new information platform, with a plan expected to be put to the board next year for a 2018 implementation.

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