PRG ditches underperforming Powerhouse stores

Pacific Retail Group's UK-based subsidiary, Powerhouse, has sold almost a fifth of its stores in an attempt to return to profitability.

Eric Watson-controlled PRG bought Powerhouse -- the UK's third-largest electrical goods retailer -- from its receivers in 2003 for $47 million.

Turning the chain around has been more difficult than expected, and a report in London's The Times newspaper says Powerhouse has sold five of its 109 stores to flooring company Carpetright, while 14 were returned to the liquidators -- KPMG and Numerica.

PRG still aims to rid itself of more than 20 loss-making stores and to cut costs to reach its aim of profitability in the year to March 2007, The Times reported.

"We are still on track to meet our target," Powerhouse chief executive Chris Onslow told the paper.

In March, Powerhouse reported a full year pre-tax loss before interest and amortisation of $51.4 million.

Making good on the Powerhouse investment is something of a face-saving effort for colourful entrepreneur Mr Watson, who owns 81.3 per cent of PRG. He now lives in Britain, and is thought to be determined to make a name for himself there.

PowerHouse faces a tough challenge in the current market, which is dominated by Comet and DSG International, the owner of Currys, PC World and Dixons.

Meanwhile, speculation has intensified that a deal on the sale of PRG's finance arm, Pacific Retail Finance (PRF), is imminent.

GE Money, a subsidiary of US giant General Electric Corp, is seen as the frontrunner. GE consumer finance chief executive Tom Gentile is reportedly in the country this week negotiating with PRF.

A report in the National Business Review today suggests that if the deal is completed, GE Money will look to sell PRF's $350 million deposit book in favour of accessing funds through the bond market.

GE Money's sibling, GE Capital is an issuer of eurobonds -- uridashi and eurokiwi -- and could access New Zealand dollars at a lower cost through that mechanism than PRF could by issuing debt, the NBR said.

That could cause an oversupply in the local market, which has already seen $20 billion of eurobonds issued so far this year.

GE Money bought finance company AGC from Westpac for A$1.6 billion ($1.72 billion) in 2002. It also bought Wizard Home Loans owner, Australian Financial Investment Group for US$300m ($442 m) last year.

PRG's finance business -- comprising Pacific Retail Finance, Pacific Retail Services, Montreal Financial Services and new addition Simply Insurance, acquired in April -- is thought to be worth $120-180m.

It accounts for $577.7m of PRG's $840.8m worth of managed assets.

PRG shares last traded at $1.98 on November 9, against a year low of $1.71 and a high of $2.31.

- NZPA