Repco Stagnates

Repco Corp’s return to private ownership is on track, despite the troubled auto products retailing reporting a 67 per cent fall in first half profit and warning of a ‘challenging’ second half.

The company said net profit was $6.1 million, down from $18.4 million in the same time last year, which was the highpoint for the year. Net profit was $9.3 million before specific or abnormal items, a fall of50 per cent.

It said the first half result was disappointing and that earnings were impacted by a store expansion program.

But sales slipped to $463 million (trade and retail) from $470.8 million a year ago

CEO, Graeme Yeomans, who joined midway through last year when the company restructured and decided on a new course of action, said sales had been on the increase for the past three quarters but remained slightly below the corresponding periods in the prior year.

“Earnings continue to be negatively impacted by the higher cost base arising from the store expansion program implemented over the past two years, increased competition and a market impacted by higher fuel prices, increased interest rates, and in recent times, drought,” Mr Yeomans said.

“This has been an extremely challenging period for Repco, with results for the first half being disappointing.”

Mr Yeomans said the current outlook is for trading conditions for the rest of the financial year to be challenging, with earnings before interest, tax, depreciation and amortisation (EBITDA), before abnormal costs, to be approximately $62 million.

Mr Yeomans said the acquisition of Repco by CCMP Capital Asia for $1.75 per share is progressing. The shares ended at $1.71 on Friday so the market doesn’t think there will be an overbidder.

Repco says if the proposed acquisition doesn’t proceed, it will probably need a capital raising to fund future investments in the business and cut debt.

Which is a ‘devil and deep blue sea’ situation for shareholders.

Repco said earnings before interest, tax, depreciation and amortisation (EBITDA) before specific/abnormal costs was $30.7 million for the half.

That was 26 per cent lower than the previous corresponding period.

The company tried to put some spin on the figures by also comparing them to the result for the second half of 2006 which wasn’t good at all: “Compared to the six months ended 30 June 2006, EBITDA increased 22%. Specific/abnormal costs of $4.6 million before tax related to the implementation of the Group’s performance improvement program, Project Accelerate.”

The last half of the 2006 financial year was indeed terrible.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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