NEWS - Retail
Published 12:39 PM, 24 Nov 2009
Last update 4:55 PM, 24 Nov 2009
Premier sees 2010 earnings growth in line with forecasts
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By a staff reporter
Premier Investments Ltd chairman Solomon Lew says the board is confident of achieving an increase in earnings growth for the 2010 financial year, in line with market expectations, with the retail group considering its position in relation to its Breville Ltd investment.
"The Premier board is however confident of increased EBITA [earnings before interest tax and amortisation] growth in FY2010 in line with current market expectations," Mr Lew said in his address at the company's annual general meeting.
Addressing GUD Holdings Ltd's hostile $322 million takeover of Breville, Mr Lew said directors were considering Premier's position in Breville.
"... In relation to our Breville investment I am only able to say at this point that the Premier board is considering its position," Mr Lew said.
"Unlike other substantial shareholders of Breville we were not approached by GUD prior to the announcement of the takeover offer and we intend to wait for all relevant information to be available before making a decision that will be in the best interests of Premier shareholders."
Mr Lew said sales so far had been credible given the market environment, with expectations of further interest rate rises and an extreme level of competition within the apparel sector.
"After seventeen weeks of trading our total sales year to date have increased by 6.7 per cent with like for like sales being 2.7 per cent higher than last year," Mr Lew said.
However, Mr Lew said the board was cautiously optimistic about the Australian economy.
"In the absence of external shocks our outlook for Australia is one of cautious optimism," Mr Lew said.
"For retailers, anticipated further increases in interest rates are never welcome (especially at Christmas) however we also recognise that the real issue for retailers is the strength of the underlying economy and employment – having people in jobs, earning wages and spending in our stores."
But Mr Lew said the board remained extremely cautious in relation to the international economic outlook.
"There is absolutely no certainty that the effects of the global economic crisis are now behind us, notwithstanding the strength of global equity markets including our own," he said.
Acquisitions a priority
Mr Lew said acquisitions would be a priority for the group in the coming year.
"We have looked at a number of opportunities very closely and continue to do so however none have proven to be compelling," Mr Lew said.
Mr Lew said the company – which holds the Portmans, Just Jeans, Peter Alexander, Jay Jays, Dotti, Jacqui E and Smiggle brands and has a network of more than 900 stores – would more than likely have another business within its portfolio this time next year, although Premier was not concerned with pursuing growth for its own sake.
"We will be very disciplined and any acquisition will need to be consistent with our focus on the creation of long-term shareholder value," Mr Lew said.
"With that very clear qualification, I think that it is more likely than not that we will have another business at this time next year."
Mr Lew said with no net debt and substantial cash reserves, Premier was in a strong position relative to other potential buyers of retail assets in Australia and globally.
"Our balance sheet remains extremely strong and is a key strength of our business as we pursue growth and investment opportunities," Mr Lew said.
Mr Lew said while the board would consider any acquisition in the retail/wholesale sector, ideally potential purchases would deliver synergies with Just Group.
Focus on Just Group
Mr Lew said Premier would focus on improving returns from Just Group, which the company purchased in September 2008.
"A key priority for Premier in 2010 is to seek continued improvement and enhanced returns from our Just Group investment," Mr Lew said.
Mr Lew said the board strongly believed it had not delivered the full potential of Just Group, and would focus on boosting the market position of each of its brands.
"We intend to work very closely with Just Group management to strengthen the market position of each of the brands and leverage higher returns through the benefits of scale and the industry benchmark ‘retail machine’," he said.
Premier shares jumped 3.63 per cent to $8.56, against a 0.67 per cent drop in the benchmark index.
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