Dismal year for Farmers Deka

By Karyn Scherer

One of New Zealand's largest retail groups has been hit hard by bad debts and falling sales in the year ending July.

After a lean winter last year, the Farmers Deka group, which has more than 120 stores throughout the country, was hoping to announce an improved result this year.

But yesterday its parent company, Perth-based wholesaler and retailer Foodland, confirmed the group's bottom-line profit had fallen by 14 per cent to $A27.2 million. Earnings before interest and tax were also down from $A47.7 million last year to $41.1 million.

For the first time, the company did not provide the results in New Zealand dollars. However, the group did reveal last month that sales had fallen during the year by 3.5 per cent in New Zealand dollars to $803 million. On a same-store basis, sales were down 3.9 per cent.

The result compares with a 13 per cent increase in same-store sales at its main rival, The Warehouse Group, over the same period. The Warehouse is due to announce its own profit results today.

According to Foodland, the Deka stores are still not profitable, although the division was "for all intents and purposes at profit breakeven" and was contributing positive cashflow.

Foodland managing director Barry Alty described the performance of the group as adequate. However, he also made it clear he was not happy with the performance of the group's credit business, Retail Financial Services.

The division, which is New Zealand's largest non-bank consumer finance organisation, saw bad debts nearly double during the year, from $A6.1 million to $A10.5 million. Meanwhile, its credit book fell by $NZ28.6 million to $324.2 million.

As a result, the organisation has said it does not expect to lower interest rates over the next year, although it will be responsive to market conditions.

Foodland has blamed New Zealand's recession and a lingering lack of consumer confidence for the profit dip.

Sales of big ticket items, in particular, had only recently picked up, it said, although the sale of the Freedom Furniture business and on-going cost savings had partly compensated for lower sales.

The group's managing director, Wayne Walden, declined to comment on the result, referring all enquiries to Foodland's head office.

Meanwhile, Foodland's other New Zealand business, supermarket operator Progressive Enterprises, has produced a much improved bottom-line profit of $A17 million, up from $9.6 million last year.

The increase came despite lower sales in both its supermarket and wholesale operations, and has been attributed to cost savings and improved management.

Foodland is currently mopping up the remaining shares in the company, after moving to compulsory acquisition late last month.

The two New Zealand businesses provide two-thirds of its operating revenue.

One-off gains of $A24.3 million, largely from the sale of its liquor business, helped boost Foodland's overall net profit to $95.4 million.