Smiths City rolls out a new look, rewards shareholders with special payment

Wednesday, 21 June 2017

Smiths City chief executive Roy Campbell.

Christchurch-based Smiths City has posted a steady profit and will make a special $5.7 million shareholder payment which may keep two circling takeover suitors at bay.

Chief executive Roy Campbell said the company was in its second year of a 'transformation' with new furniture designs and suppliers.

Smiths City chairman Craig Boyce (left), and director John Dobson at the last annual meeting.

The 'refresh' and savings lifted the trading profit to $2 million on revenue of $227m for the year ending April 2017, up on the $1.3m profit on turnover of $221m the previous year.

* Brierley companies up stake in retailer Smiths City

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The shareholder payout, in addition to a total 3.5 cents a share fully imputed (tax paid) dividend, may reduce the rationale for replacing directors, launching a takeover, and possibly breaking up the company.

The power-weilding shareholding blocks include Sir Ron Brierley-associated companies Mercantile Investment and Sandon Capital, which lifted their holdings before Christmas to 19.8 per cent - just below the threshold for a takeover bid.

Similarly, US-based Guaranty Finance lifted its shareholding to nearly the same level.

At the last annual meeting the Brierley interests tried to overthrow long standing Smith directors.

The special shareholder payment will be funded partly through the $1.8m net proceeds from the sale of the flagship Christchurch store building in Colombo St just over a year ago to local property investor John Butterfield.

The balance of the special payment comes from a 10 per cent savings in reducing stock, other cost reductions, and partly from insurance payouts, Cambell said.

Trading for Smiths' stores had eased off as consumer confidence waned over the past four months, he said.

Restructuring and the first rollout of a new 'live better' brand had maintained margins, albeit the recently acquired three Furniture City stores in the Auckland region 'struggled' to meet expectations.

The rebranding, changed store formats, and products came in response to consumer feedback, Campbell said.

Cash flow had been strong with revenue ahead 2.5 per cent to 227m, offsetting closures of two appliance stores in Wellington and Christchurch costing $1.4m, and aggressive competition.

The finance business also came under pressure from rivals.

In coming months the Furniture City stores will be rebranded as Smiths, and five more stores will follow the Hastings outlet 'live better' rebrand beginning in Whangarei.

The outlook was cautiously optimistic in a challenging market with demand for consumables weakened by rising interest rates.

Chairman Craig Boyce said Smiths would also launch more attractive finance terms.

Even after the payout to shareholders the company would have conservative debt levels at 15 pr cent debt to total assets, he said.

The payout will see Smiths compulsorily acquire and cancel three in every twenty shares at 72 cents per share, subject to shareholder approval at the annual meeting in August.

The plan is also subject to High Court approval, the company's bank ASB, and IRD.