Insurance payout boosts Smiths City's reported profit

Retailer Smiths City Group used an $8.5 million insurance payout to substantially boost its reported profit for the year ended April 30.

Revenue for the group crept up 1% to $221.4 million in the period but the trading profit slipped 54% to $2.6 million from $5.6 million.

However, the group used other income - the insurance payout - to report a profit before tax of $9.3 million for the year, up 98% from the previous-corresponding-period profit of $4.7 million.

The group pays no tax and has $7 million of tax losses carried forward for future years.

An unchanged final non-tax-paid dividend of 2.5c per share will be paid.

Chairman Craig Boyce said the financial insurance settlement was used to reduce debt.

As a result, the net asset backing increased from 78cps to 90cps.

Borrowings reduced in the period from $22.6 million to $16.1 million.

Net cash flow from operations, excluding the insurance settlement, increased from $3.1 million to $4 million.

''While the retail environment remains challenging, we are pleased Smiths City has broadly held revenues when compared to last year.''

Sales on a same-stores basis increased 2.5% on last year when the closure during the year of four ''appliance only'' stores was taken into account.

That gave the group an opportunity to expand its offer through the addition of a new store in Taupo, which would open in October.

Smiths City had a desire to broaden its offering through the North Island to rebalance its revenue across New Zealand, he said.

''We will continue to seek and identify market opportunities during the year ahead.''

The South Island market post-Christmas was weaker than the pcp due to lower confidence in the rural and provincial areas arising from the east coast drought and lower farm product prices.

That was likely to affect South Island sales during the year ahead.

The group maintained market share in its core categories and continued to improve returns through emphasising the home furnishing and whiteware categories of its retail business.

Sales and margin pressure continued with fierce competition in the computer and consumer electronics segment, with subsequent margin erosion as a result, he said.

Price deflation continued in computer and communication products but had stabilised in consumer electronics, with price increases likely in the period ahead due to the weakening dollar.

The directors had tasked new chief executive Roy Campbell with the immediate objective of improving returns from the group's retail operations.

The company was continuing the review of its supply chain as part of a wider strategic review of all areas of the business, Mr Boyce said.

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