McPherson’s credits Think Appliances acquisition with a turnaround in fortunes

The new owner of Think Appliances, McPherson’s Limited, has attributed its acquisition of the appliance company as one of the major factors in a revenue turnaround at the company over the past six months.

However, the addition of a new brand to the McPherson’s stable is not expected to reverse the company’s fortunes in the short term, with a tough retail climate and an increased focus on house brands across the industry called out as factors negatively impacting profits and margins.

In a trading update issued to the market today, McPherson’s listed its acquisition of Think Appliances as one of the major driving forces in a 18 per cent increase in revenues for the first half of the 2014 financial year, compared to the prior corresponding period.

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The company has previously announced a focus on acquisition and diversification as significant pillars of its company strategy and a means of turning around poor financial performance. By October last year, McPhersons had acquired two new beauty brands (including cosmetic skincare brand Dr LeWinn’s and treatment brand Revitanail) as well as Think Appliances and the Baumatic brand, thereby “considerably expanding the company’s existing home appliance business”.

These acquisitions are set to drive revenue growth, but profits at McPherson’s are still expected to be weak according to a statement from the company:

Mainly as a consequence of business acquisitions in the current and prior year, first half FY2014 revenue will be around 18 per cent higher than the previous corresponding period.

However increased pressure on margins…in conjunction with a decline in foreign exchange rates during the current period will result in underlying after tax profit for the half year ended 31 December 2013 being around $10.2 million, or 2 per cent below the $10.4 million achieved in the first half of last year.

The company also foreshadowed a significant decline in statutory profit after tax for the first half of this financial year, down to $9.0 million — a decline of 17.8 per cent.

Among the factors driving the “pressure on margins”, McPherson’s cited “the subdued retail sales environment, the requirement to increase promotional trade spend, increases in product costs and customers placing a greater emphasis on private label product ranges”.

McPherson’s Limited will release its full results for the first half of the 2014 financial year on 18 February 2014.

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