Smiths City shares rose 5.8 percent after the retailer’s first-half earnings were buoyed by increased sales, although a tax adjustment kept the bottom line in the red.
The company reported a net loss of $100,000 for the six months through November, having broken even a year earlier. A $700,000 deferred tax charge wiped out its $600,000 of underlying earnings. The finance unit underpinned earnings, with revenue rising 7.9 percent to $4.1 million for a trading profit of $2.1 million. That was down 13 percent from a year earlier due to a correction to a provision for bad debts.
The much larger retail unit increased revenue 3 percent to $107.9 million and narrowed its trading losses to $600,000 from $1.7 million a year earlier. Smiths City put the increase down to its online and commercial operations.
“Retail conditions in our core categories over the last six months have been supportive and the group has begun to see some early encouraging results from an ongoing strategic review,” chair Alastair Kerr said in a statement.
“As the painful, but prudent, provisions we took on onerous leases at the end of last year show, the group is demonstrating a willingness to take all necessary steps to drive improvements in shareholder value.”
The board didn’t declare an interim dividend, reaffirming plans to keep investing in the company’s basic infrastructure.
At the September annual meeting, Kerr told shareholders the company won’t start paying dividends until the firm is growing and generating more cash than it needs to invest back in the business. The turnaround would not be quick or cheap.
The shares rose 1.5 cents to 27.5 cents – from an eight-year low 26 cents yesterday.
Chief executive Roy Campbell said the second half of the year, which includes the Christmas trading period, is usually the company’s busiest, and he will provide a trading update early next year.
“We are intensely focused on continuing to drive the renewal we have seen in the first half of the year,” he said. “We will continue to review the store network and will not hesitate to close stores where there is little chance of them making a contribution to the group.”
