Clive Peeters on track to meet profit target

By James Wells

MELBOURNE: Clive Peeters CEO, Greg Smith, has announced his company is on track to meet forecast operating profit after tax of $12.2 million for the 2006 financial year.

The company plans to meet this forecast, set out in the company’s prospectus prior to listing on the Australian Stock Exchange on 22 September last year, despite patchy market conditions over the last six months.

Yesterday, the company announced a 68 per cent increase in operating profit after tax of $5.9 million for the six months to 31 December, 2005.

The result includes a three month contribution from the recently acquired Rick Hart stores and Michael King store.

According to a statement released by the company, comparable store sales growth for the six months was -2.8 per cent for Clive Peeters stores and 15.5 per cent for Rick Hart stores, with overall growth for the group of 2.1 per cent.

Clive Peeters was able to apply its existing buying power across the combined group to achieve an uplift in gross profit margins to 25.2 per cent as forecast in the prospectus. Operating costs were 4.7 per cent lower than forecast, which resulted in Clive Peeters meeting its operating profit after tax forecast for the first half.

According to Smith, sales were adversely impacted during September and the first half of October due to petrol price pressures, housing market deterioration and consumer sentiment.

“Sales in November and December were strong. This trend continued into January and February, with sales in line with typical seasonal trends,” Smith said.

While sales were slightly down on prospectus forecast, Smith believes operating profit remained on target due to profit margins being increased in line with prospectus forecasts and operating costs being carefully managed in line with sales levels.

According to Smith, integration of the Rick Hart stores acquired in September 2005 has progressed well, with the successful implementation of Clive Peeters’ information technology systems across all stores and all duplicate back office functions being removed and now operating centrally out of Victoria.

Since publicly listing, Smith said Clive Peeters has been able to apply its buying power to the Rick Hart stores as forecast, and has introduced additional product categories including computers and home entertainment packages.

Refurbishment and rebadging of the acquired Michael King store in Malvern was completed within three weeks of the acquisition, with new product categories of home entertainment, computers and peripherals and air-conditioning introduced.

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