Briscoe first-half profit soars by 33pc, hikes dividend as margins expand

The retailer declared an interim dividend of 7 cents per share. Photo / Ross Setford

Briscoe Group, which operates stores selling household items and sporting goods, lifted first-half profit by 33 per cent and hiked its interim dividend after widening gross margins with more rigorous inventory management and boosting sales.

Net profit rose to $27.3 million, or 12.21 cents per share, in the 26 weeks ended July 31, from $20.5 million, or 9.21 cents, a year earlier, the Auckland-based company said in a statement. Sales gained 10 per cent to $268.4 million, outpacing an 8.3 percent lift in the cost of goods sold to $155.9 million.

"The gross margin percentage continues to benefit from the constant attention on inventory management with initiatives focused around improving inventory availability and increasing the efficiency of getting stock from the back door to the shop floor realising substantial benefit to the group," the company said."

The result was in line with the retailer's August guidance for profit to rise by at least 32 per cent, when Briscoe said it was managing its inventory levels more closely and keeping a tighter rein on clearance and promotional sales.

The retailer declared an interim dividend of 7 cents per share, payable on Oct. 10 with an Oct. 3 record date, up from 6 cents a year earlier. The shares were unchanged at $3.83, having gained 33 per cent this year.

Managing director Rod Duke, who owns about 78 per cent of the company, said margins in the second half of the financial year will come under pressure as the New Zealand dollar depreciates, making imports more expensive, while the period is one week shorter than the second half of 2015.

"We are conscious that hedging of foreign exchange exposures taken across the last 12 months at less-favourable rates than those available currently, will continue to flow through to the cost of imported product," Duke said. "This will cause increased pressure on the gross profit margin percentage for the second half of this year."

Briscoe received a dividend of $1.2 million from its 19.9 per cent stake in outdoor equipment chain Kathmandu Holdings, which reports its first-half earnings on Wednesday. Briscoe sought to buy Kathmandu last year in a $1.80 per share cash-and-scrip offer which was rejected by the outdoor equipment chain's board as being too low.

The retailers are now disputing the level of costs Briscoe has to pay in its failed takeover bid.

We are conscious that hedging of foreign exchange exposures taken across the last 12 months at less-favourable rates than those available currently, will continue to flow through to the cost of imported product.

Duke has previously said he was still interested in mounting another bid, and today said Briscoe continues to watch Kathmandu's "performance closely and note the progress management is making as they seek to restore historical levels of profitability."

The Australian newspaper today named Briscoe as a potential suitor for clothing and homeware retailer EziBuy, which Australian supermarket chain Woolworths is seeking to offload after failing to integrate the $350 million acquisition into its Big W business.

Briscoe has no bank debt, and had cash and equivalents of $13.9 million as at July 31, down from $16.7 million a year earlier.

Separately, Briscoe's board appointed Andy Coupe as an independent director starting next month. Coupe replaces Alaister Wall who retires from the board on September 30, while staying on with the senior management team until next year.