Melbourne-based whitegoods group, Clive Peeters seems to be one retailer which missed the stimulus boom.
The company is facing a 2009 loss, dividend will be skipped and the outlook is grim with a lock on costs to allow cashflow to grow.
Costs have been cut, stores and a big warehouse in NSW closed and staff reduced.
A revamp plan that was based on a recapitalisation of the company has been ended.
The company says it expects the tough trading conditions to continue into 2010, but is confident the reduced cost structure will see a return to profitability.
The market didn’t like the news and the shares fell 1.5 cents to 16.5 cents.
Directors announced that a Strategic Review that formally commenced in February of this year, has been abandoned after failing to provide "acceptable outcome that represents shareholder value, or is in the best interests of shareholders."
The company revealed that it will incur a loss in the 2009 financial year that ended on Tuesday.
"The Company had provided guidance in an earlier announcement about the prospect of a nominal operating loss for FY’09.
"The Company forecasts that it now expects to report an Operating Loss before Tax for FY 2009 within the range of $4.5m to $5m, but this includes non-recurring costs associated with the strategic review; losses on stores now closed and store closure costs; one off costs of re-engineering the business’ overhead cost structure, and the costs of recent refinancing.
"Collectively these nonrecurring costs approximate $2.1m".
The Company also confirmed that it will not be declaring a final dividend for FY’09.
Explaining the decision to ditch the review, CEO Greg Smith, said in the statement “although our preferred outcome from the strategic review was a re-capitalisation of the Company it has been very difficult in this economic environment for small to medium listed companies to raise capital, so for now it is business as usual and we welcome the opportunity to concentrate our full attention on managing the business.
"Nevertheless we will continue to explore any genuine opportunities to strengthen our Balance Sheet and to reduce our reliance on Debt going forward.”
The company said it and its Bank, the National Australia Bank, have completed the annual roll over of the Company’s short term facilities for a further 13 months to 31st July 2010. The Company’s longer term facilities are not due for renewal until 30th June 2011.
Mr. Smith said “This is very positive news, and a credit to our management team.
"Big ticket discretionary retail conditions have been and will remain challenging, with sales and margins under considerable pressure.
"However our business plan for FY’10 is sound, and the Company has taken and is continuing to take the appropriate action to manage a very difficult retail cycle”.
“Over FY’09 we have progressively reduced our underlying business overheads by $38 million annualised.
"This is an outstanding result which our management team has worked hard to achieve.
"An approximate $14.1m of this cost re-engineering will reflect in the FY’09 result, but the full benefit of this overhead restructuring will be realised in FY’10.
"With this reduced cost structure now firmly in place we are confident we have repositioned the business for a return to profitability in FY’10, even taking into account the likelihood that sales and margin will be under continuing pressure during FY’10.”
“Whilst 2009 has been an extremely difficult year due to tougher than expected trading conditions in the premium discretionary retail space, we have used the time well to prepare the business for the long term sustainability of the Company.
We have closed three small and unprofitable stores in FY 2009 (Greensborough Vic., Northbridge WA and Aspley No. 2, Qld.) and will close one more in the next few weeks (Hervey Bay Qld.).
"FY’10 will see a continuation of the consolidation phase, with expansion on hold until the retail cycle improves.
"The Company’s focus on improving trading results in New South Wales resulted in the recent closure of our centralised warehouse facility, and we will now service our customer deliveries in that State direct from our retail stores. The closure of the central warehouse will not compromise the Company’s customer service or value proposition.
"We have also taken other steps to further reduce our costs of operation in New South Wales.
"These initiatives should allow the State to move even closer to break even trading over FY’10.
"We are committed to maintaining the lower cost structure and when the business cycle does turn, as we expect it should over the latter part of calendar year 2010 and into 2011, Clive Peeters will be well placed to leverage improving profitability from this lower cost base.
"Having said that, our business plan for FY’10 is conservative and is predicated on the assumption that retail conditions will continue to be as challenging as they were over FY’09.”
The Company announces that by adopting very strict inventory management disciplines it has reduced its overall investment in inventory over FY’09 by in excess of 20% despite opening two new superstores. Smith said
“This has assisted us to maintain our sound cash flow po
