Bendon Group Limited Preliminary Announcement
30 May 2001
Bendon Group Limited
Additional Information For Year End 31 March 2001
NZSE 30 May 2001
The Directors of Bendon Group are pleased to advise shareholders that their trading company, Bendon Ltd, has shown very good resilience in exceedingly difficult market conditions to post an earnings before non-recurring items, interest and tax (EBIT) result of $5.336m for the year ending 31 March 2001. This result was achieved on sales of $78.036m giving an EBIT:Sales ratio of 6.8% which compares favourably to benchmark data for international apparel companies.
The past year was one of transition for the Bendon Group as it took further steps to move from being a former conglomerate to a single business company. Bendon Ltd, now has a single focus on designing, marketing and distributing intimate apparel. The finalisation of the sale of New Zealand China Clays, the rationalisation of the Corporate structure including the change of company name and progress toward a United Kingdom business have all been successfully undertaken and each of these elements are discussed in following paragraphs.
After a full year of sourcing all of its product offshore it is apparent that this was the right decision. Without the competitiveness and flexibility gained from offshore sourcing, Bendon would not have been as successful as it has been given the significant downturn in retail markets during the second half of the financial year. This is most apparent in the Australian marketplace.
The downturn in the Australian consumer market has been well documented by other business commentators. Your Directors drew your attention to this in their announcement of 28th February 2001.
New Zealand trading conditions were also difficult and the impending withdrawal of the retail chain "Deka" from the market illustrates how competitive this marketplace now is. Exchange rate fluctuation continues to have an impact on the business.
Nevertheless, Bendon has been able to maintain, or grow, its share in its targeted segments, albeit in an era of smaller overall market revenues, to approximately 50% in New Zealand and 25% in Australia, in the sectors in which Bendon trades. In New Zealand sales benefited from twelve months revenue from the Bennett and Bain stores, and the re-launch of the Fayreform brand in the local market. The Directors believe that further market share growth in both countries will be difficult and are looking to new opportunities such as the United Kingdom. At a time of relatively flat retailing conditions Bendon has continued to hold costs and ensure the competitive position obtained from offshore sourcing is maintained. Tight control of costs has not been allowed to detract from the innovative style and fashionability which is associated with the Bendon brands.
Directors are pleased to confirm that orders have been received from major United Kingdom department stores for delivery of the “Elle Macpherson Intimates” range of product into their stores in August/September of this year. This range of product is the vehicle for the UK entry. Prior to delivery a major launch campaign will be undertaken with a combination of media and press presentations supported by Elle herself.
Bendon has formed a number of alliances to effect its operations in the United Kingdom. Bendon will retain responsibility for marketing and design.
Given Bendon's significant market share in New Zealand and Australia there is a continuing strong focus on successfully establishing the United Kingdom business. There is a cost to entering a new market and, while the Bendon management team has strived at all times to contain costs, one-off costs of $1.222m have been expensed in the accounts for 31 March 2001 as a non-recurring item. These costs were incurred in the initial market research, establishing strategic alliances, developing product ranges for the UK market and presentation of these product ranges to potential buyers.
SALE OF NEW ZEALAND CHINA CLAYS
After approval from shareholders, the business of New Zealand China Clays was sold effective 1 July 2000. Trading for the three months to 30 June produced an EBIT result of $1.682 million and the net profit on sale of the business was $28.351 million.
Following the decision to sell New Zealand China Clays the name of the holding company was changed on 1 June 2000 from Ceramco Corporation Limited to Bendon Group Limited. The name change reflects the focus of the company going forward.
During the year, Mr S Marsters resigned from the Board following the disposal of New Zealand China Clays, Mr P E Hills retired and Mrs J Withers did not stand for re-election. Mr Trevor Kerr was appointed as a Director in September 2000.
RESTRUCTURING OF BENDON GROUP LIMITED
The liquidation and rationalisation
process is proceeding to plan. The company accounts show,
as a non-recurring item, re-organisation costs of $9.0m
which were set aside in the September half year to cover the
costs of liquidation and the consequent crystallization of
liabilities, such as tax on prior earnings of overseas
subsidiaries. As an on-going business it would not have
been required to recognise these at this time. All costs
and income associated with the Corporate Office have been
absorbed within this provision during the period, including
interest income on invested funds. Further details of the
finalisation of the restructuring plan will be announced in
CAPITAL AND BALANCE SHEET
Consequent to the sale of New Zealand China Clays the company cancelled 1 in every 4 shares held by shareholders resulting in 10,275,644 shares being cancelled and $16.338m paid to shareholders, this being the most effective way to return some of the proceeds from the sale of New Zealand China Clays. During the year 718,000 options to acquire shares in the company were exercised, resulting in the issued capital being 30,886,165 shares as at 31 March 2001.
Shareholders' funds totalled $52.000m ($46.964m at 31 March 2000) representing an equity ratio of 76.2% (79.6%) on total assets of $68.233m ($58.955m).
A special fully imputed dividend of 4.0 cents per share was paid to shareholders on 30 August 2000. An interim fully imputed dividend of 5.0 cents per share was paid to shareholders on 20 December 2000.
Directors are mindful of their previously stated dividend policy of paying dividends equating to 75% of normalised tax paid profits, subject to the capital and operating requirements of the Group.
After reviewing the results of the Bendon operations for the year ended 31 March 2001 the Directors have resolved to pay a dividend of 4.0 cents per share fully imputed in respect of the past year. The total cost of the dividend will be $1.235 m and will be paid on 11 July 2001 to shareholders on the register at the close of business on 6 July 2001. A supplementary dividend of 0.7059 cents will be paid to non-resident shareholders.
ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders will be held at the Ellerslie Convention Centre (The Goldstar Room) 80-100 Ascot Avenue, Greenlane at 2.30 pm on 26 September 2001.
A summary of the full Group result is outlined below. Further details are available in the Stock Exchange schedules.
- Revenues NZ 36.996 34.322
Australia 41.090 43.537
Operating earnings (EBIT) b/f 5.336 6.213
non recurring items and taxation
Non-recurring (1.222) (9.009)
Pre-tax 4.114 (2.796)
- Revenues 6.065 16.237
earnings (EBIT) b/f
non recurring items and taxation
Minerals 1.682 4.761
Corporate - (0.713)
Minerals - (1.806)
Corporate - (0.338)
Sale of Minerals Division 28.351 -
Reorganisation Costs (9.000)
- less included under Taxation 7.100 (1.900) -
Pre-tax 28.133 1.904
Group Surplus/(Deficit) before taxation 32.247 (0.892)
Interest Costs 0.013 0.259
Charge 8.974 0.280
Surplus/(Deficit) for the period 23.260 (1.431)
after taxation ______ ______
Bendon Ltd has structured its business to operate profitably in the current market environment. Any further downturn in the Australian economy will adversely affect business in the new financial year.
The business is poised however to take the utmost advantage of any rebound in the markets and as opportunities arise in both New Zealand and Australia, Bendon will exploit these. The entry into the United Kingdom market will boost sales, but will not begin to contribute to profitability until the year ended 31 March 2003.
I M Parton
30 May 2001