Specialty Fashion’s takeover snag, profit jump

Gary Perlstein By Richard Nolan-Neylan 2013_0197Specialty Fashion Group has posted a 37 per cent rise in profit to $12 million, despite revenue falling one per cent to $430 million in the six months to December 31.

It’s been a busy day for the retailer, which owns Rivers and Katies, who also provided an update on the takeover bid from Al Alfia Holding, with a snag currently halting proceedings.

“Al Alfia holds and manages substantial investment assets well in excess of the intended acquisition consideration and its bank had provided a confirmation letter stating that, to their knowledge, the sole shareholder of Al Alfia, has the financial means to enter into the intended acquisition,” a statement read.

“However, due to the unforeseen circumstances relating to the death of the father of the sole shareholder of Al Alfia, the funding has been temporarily restricted in probate. Al Alfia has advised they are addressing the probate issue however has not been able to confirm when this will be resolved.”

SFG said after the uncertainty that it will “continue to focus on the standalone strategy and key growth priorities”.

“At the time that the probate issue is resolved and Al Alfia returns to the Board with a proposal capable of being put to shareholders, the Board will assess it on its merits”.

SFG’s underlying earnings before interest, tax, depreciation and amortisation jumped 12.7 per cent to $30.4 million in the same period.

Comparable store sales declined 2 per cent, while gross margin improved by 1.9 per cent on a comparable basis to 58.0 per cent.

“This is a hard fought result, achieved in a difficult and volatile Christmas trading environment,” said Gary Perlstein, CEO, SFG.

“While sales revenues were slightly down, margin improved due to better markdown management and holding the overall cost of doing business flat.

“While we have further consolidated our position as the largest specialty retailer of women’s fashion in Australia, we remain focused on increasing our efficiencies in everything we do.”

Online sales grew 28 per cent over the PCP to comprise 10.6 per cent of total sales, which Perlstein said continues “to be well ahead of industry benchmarks, and an outstanding result for the retail demographic we operate in”.

“Our strategy is to be the leading omni-channel retailer in our markets,” he said. “Specifically, to lead in meeting the needs of women who are often overlooked by fashion – the older and plus-sized segments”.

Perlstein said SFG is confident Rivers can continue its rebound after the brand traded profitably at an EBITDA basis for the half-year.

“The Rivers turnaround is on track, and while we feel the worst is well behind us, we will not be complacent in our focus and drive to ensure this improvement continues,” said Perlstein. “We remain confident Rivers can maintain its growth momentum and achieve a much improved result this year over PCP.

SFG’s gross capital expenditure was $8.6 million for the half-year (PCP $7.6 million), with funds predominantly spent on store refurbishment, the concession roll-out of City Chic into Myer locations, the opening of new stores, investment in IT systems and on the turnaround of Rivers.

The Group’s costs of doing business, as a percentage of sales during the year, increased to 51 per cent (PCP 50.2 per cent).

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