Misappropriation worsens FY09 result for Clive Peeters

Clive Peeters has just announced its financial results for the financial year ending 30 June 2009. The company witnessed an $11.3 million pre-tax loss; $4.8 million of this was due to the misappropriation of funds discovered last month.

According to the results issued to the ASX, Clive Peeters would have recorded a pre-tax loss of $6.5 million, but expenses surrounding the misappropriation of funds has pushed this figure up to $11.3 million.

In other results, Clive Peeters group sales were down 7.1 per cent to $496.9 million, gross profit margin fell 7.9 per cent to 24.3 per cent and inventory reduced by $23.3 million, down 17.7 per cent.

Greg Smith, Clive Peeters managing director, commented on the recent financial results.

“The conditions for the big ticket discretionary retail industry over FY09 have been challenging. Consumer sentiment hit a 16 year low, resulting in a decline in floor traffic across all stores, and in all states,” he said.

Smith talked about the strategies the group implemented to quell the effects of the economic slowdown.

“With the first evidence of sales softness emerging in Q4 2008, and continuing into Q1 2009, Clive Peeters quickly initiated strategies to compensate,” he said.

“We had to make cash and inventory management our highest priorities, at the expense of profitability, and set about reducing our overheads to improve our cash position.”

Smith mentioned that the group witnessed its first decline in margins in over 15 years.

“Increased competition, a shift towards lower margin home entertainment and technology products, and the loss of rebate revenue, also put pressure on margins, as the company experienced its first decline in over 15 years,” he said.

Smith was confident that the company’s performance will improve once the issues surrounding the misappropriation are resolved.

“We have previously announced that our cash reserves will be strengthened by the proceeds of sale of properties and assets that were purchased by the staff member and related parties out of the cash misappropriated,” he said.

“These assets are in the process of being transferred back to Clive Peeters, and will be sold in an orderly fashion. We are confident that our operating performance will improve once our business consolidates following these events, as we now have the opportunity to normalise our supply of trading stock.”

In additional news, Smith highlighted that two new Clive Peeters stores have been opened in FY09 (Coburg and Townsville) and three unprofitable stores were closed as a part of its cost reduction programme. An additional store in Harvey Bay was also closed in July 2009.

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