Archive | Pacific Retail Group

PRG loss $57 million

Published 30 August 2006

PRG Group Ltd, now almost 100% owned by Eric Watson’s Logan Corp Ltd, reported a $56.7 million loss for the March year, a 73% drop in after-tax earnings on a 37% drop in revenue to $630 million.

After tax & abnormals, the return was down 217% to $54.3 million. PRG won’t be paying a final dividend.

The company sold its finance group during the year (effective at the end of January) and its disastrous UK retail business, PRG PowerHouse Ltd, was placed in administration on 2 August.

Earlier stories:

19 August 2006: Fund acceptance will make Watson’s “not unreasonable” low bid for PRG a fait accompli

2 August 2006: Watson to privatise PRG, puts PowerHouse into administration

1 February 2006: PRG completes sale of finance group to GE

26 November 2005: Pacific Retail only has an operating loss, no sale gains to report

31 May 2005: Plenty of red ink through PRG accounts despite profit


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Attribution: Company statement, story written by Bob Dey for this website.

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Fund acceptance will make Watson’s “not unreasonable” low bid for PRG a fait accompli

Published 19 August 2006

The independent advisor on Eric Watson’s bid to privatise PRG Group Ltd has given a 66c price range for the shares’ value because of uncertainty over PowerHouse in the UK. The offer is 16c from the bottom of that range, but the independent advisor said it was “not unreasonable”.

The shares last traded, before their suspension on 10 July, a cent from the bottom of their 12-month price range, at $1.55/share. The offer by Mr Watson’s Logan Corp Ltd is $1.22/share – a 22% discount – and the value price range given by independent advisor Grant Samuel & Associates Ltd is $1.06-1.72/share.

The committee of independent directors, PRG chairman Jock Irvine & director George Brooks, told shareholders in a letter sent out yesterday:

“Grant Samuel has concluded that the value of PRG shares is in the range of $1.06-1.72/share. Grant Samuel notes that the valuation of PRG is currently uncertain due to PowerHouse being placed into administration – in particular, the administrator of PowerHouse, BDO Stoy Hayward, has not clarified the potential liabilities under the outstanding lease guarantees with any degree of certainty.

“Whilst the offer price of $1.22/share is towards the lower end of the range assessed by Grant Samuel, the committee is inclined to the view that the offer price is not unreasonable having regard to the uncertainty surrounding contingent liabilities of PRG.”Logan, a subsidiary of Cullen Investments Ltd, which is owned by interests associated with Mr Watson, gave notice of its takeover offer on 1 August for the roughly 19% it didn’t own. At the same time it said it had entered into an agreement with AllianceBernstein NZ Ltd whereby AllianceBernstein, as agent for a number of underlying holders, agreed to accept the offer in respect of the 12.3% of PRG it controlled.

That left just 6.4% of PRG to argue about, held by 400 shareholders. Under the agreement, AllianceBernstein is to accept the offer within 5 business days of getting it and, when that happens, Logan will be able to proceed with compulsory acquisition of the remaining shares.

Grant Samuel said that under the rules of the Takeovers Code, if a bidder secures acceptances from more than 50% of the shares it doesn’t own before the offer and in doing so passes the 90% compulsory acquisition threshold, then the offer price will be the price paid to all shareholders. That meant shareholders couldn’t object to the offer and there is no mechanism for the takeover price to be challenged.Mr Irvine said PRG still had to issue a target company statement and obtain an independent advisor’s report, which had to refer to the company’s most recent annual report. PRG will issue its report for the March 2006 year in the next 7-10 days and, when that happens, remaining shareholders will get the takeover documents – which, as Mr Irvine pointed out, would be of academic interest only.

Outlining the PowerHouse influence, Mr Irvine said in his letter: “In September 2003 PRG acquired PowerHouse. At that time the market capitalisation of PRG was $135.1 million, with a share price of about $2.20. At a takeover offer price of $1.22, PRG has a market capitalisation of $76.3 million. The value of PRG has reduced by about 40% since the acquisition of PowerHouse. As a shareholder, 81.29% or about $45 million of the reduction in value of PRG since the acquisition of PowerHouse has been worn by Logan Corp. By any measure this is a significant reduction in shareholder value which all shareholders, including Logan Corp, no doubt view as unsatisfactory.”The valuation of PRG today is uncertain due to the Logan offer coinciding with PowerHouse being placed into administration. At the date of this report the administrator of PowerHouse, BDO Stoy Hayward, has not clarified the potential liabilities under the outstanding lease guarantees with any degree of certainty.”

Earlier stories:

16 August 2006: Watson’s PRG bid opens

2 August 2006: Watson to privatise PRG, puts PowerHouse into administration


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Attribution: Company statement, story written by Bob Dey for this website.

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Watson’s PRG bid opens

Published 15 August 2006

Eric Watson’s Logan Corp Ltd has sent its full takeover offer for PRG Group Ltd to shareholders.


The $1.22/share offer is conditional on acceptances giving Logan 90% control, a conditional which can’t be waived, and closes on Monday 11 September. Logan already held 81% of PRG when it announced the bid on 1 August, and had a pre-bid agreement to acquire the 12.3% stake which AllianceBerstein manages on behalf of Axa Asia Pacific Holdings Ltd & other clients.


Earlier story:

2 August 2006: Watson to privatise PRG, puts PowerHouse into administration


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Attribution: Company statement, story written by Bob Dey for this website.

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Watson to privatise PRG, puts PowerHouse into administration

Published 2 August 2006

Eric Watson’s Logan Corp Ltd has entered into a pre-bid agreement that will enable it to fully privatise PRG Group Ltd.

The agreement is to acquire the 12.3% stake which AllianceBerstein manages on behalf of Axa Asia Pacific Holdings Ltd & other clients.Logan Corp already holds 81% of PRG Group, so the agreement means it can make a full takeover offer for all shares (including AllianceBerstein’s clients) for $1.22 cash/share and move immediately to compulsory acquisition of all remaining minorities.Logan Corp is part of Mr Watson’s privately held investment company, Cullen Investments Ltd.

Cullen chief operating officer Liz Style said privatisation was a natural progression for PRG Group: “The compliance & operating costs of being a public company are a significant consideration. Given the lack of liquidity in PRG Group’s shares, and the fact that its investment portfolio has now consolidated to a smaller size, we believe it is appropriate to privatise the company. Privatisation will provide a more flexible investment, funding & operating structure.” PRG has established a special independent directors committee comprising chairman Jock Irvine & director George Brooks to be responsible for all actions to be taken by PRG in connection with the offer. This will include getting independent advice and preparing a target company statement.

The PRG Group board also announced its decision today to place UK electrical retailer PowerHouse into administration due to market conditions.

Mr Irvine said: “Within the electrical sector itself, the competitive landscape has toughened over the last 3 years with excessive price deflation in technology products, supermarkets securing big name brands, the 2 big national chain retailers expanding to superstore destination sites and an increase in internet trade.”At the end of May, we saw the UK’s No 4 electrical retailer, Miller Brothers, placed into administration. Simply, the position for PowerHouse as the No 3 electrical retailer, with less than 1% market share, is no longer sustainable.” He said that, as an investment company, PRG Group’s approach was to invest in underperforming businesses and add value through the application of people, capital & ideas to achieve turnaround. At the time of acquisition, PRG Group believed PowerHouse was an attractive proposition – with significant assets including a hard-to-obtain retail store portfolio, extensive customer list, warehousing & distribution capability – but its turnaround had been seriously impacted by the changing market.”As with any investment, there are risks involved and, in the case of PowerHouse, it has become clear the returns we were working towards are unfortunately no longer achievable,” Mr Irvine said.

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Attribution: Company statement, story written by Bob Dey for this website.

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PRG completes sale of finance group to GE

Published 1 February 2006

PRG Group completed the $145 million sale of its finance group to GE Finance & Insurance yesterday.Under the settlement, PRG has changed its name from Pacific Retail Group Ltd to PRG Group Ltd. It will post a $75 million capital profit (net of costs) from the sale.The finance group comprised 4 companies – Pacific Retail Services Ltd, Pacific Retail Finance Ltd, Montreal Financial Services Ltd & Simply Insurance NZ Ltd. The structure of the sale meant the finance group’s loan book & other assets were sold to GE, together with the shares in Simply Insurance NZ.PRG Group chairman Jock Irvine said the group would use part of the sale proceeds to repay $62.7 million of outstanding secured capital notes & $20 million of loans to principal banker ANZ.

“The sale will allow PRG Group to retire all parent company debt, leaving it in a strong financial position to continue to fund growth in its major operating businesses,” Mr Irvine said. If you want to comment on this story, write to the BD Central Discussion forum or send an email to [email protected].

Attribution: Company statement, story written by Bob Dey for this website.

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PRG expects to complete finance group sale to GE in January, sells retail property services business to management

Published 24 December 2005

Pacific Retail Group Ltd said it expected to settle the sale of its finance group to GE Finance & Insurance by the end of January. It also announced a second business sale on Friday.

Pacific Retail Group got shareholder approval for the sale on Friday, has Overseas Investment Office approval but still needs Commerce Commission approval.  The company said it had sold its retail property management services company, Pacific Retail Properties Ltd, to existing management on Wednesday, 21 December. The services company was established primarily to service the group’s appliance & furniture business, which was sold last year. The group board decided the wider group’s interests would best be served by outsourcing property management.Pacific Retail Properties management will take over the current contracts, including the development of Bendon’s new Australasian warehouse near Auckland International Airport.

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Pacific Retail only has an operating loss, no sale gains to report

Published 26 November 2005

Pacific Retail Group Ltd lost $35.9 million after tax in the September half. The announcement of its result, by chairman Jock Irvine & chief financial officer Paul Elliott, demonstrated a fair bit of wriggling to contrive the appearance of a company that’s not really so bad.

In effect, Pacific Retail said it runs businesses at a loss, which was much the same last year & this year, but can sell them at a profit. Last year it sold the New Zealand appliance & retail business and, in the second half of the March 2006 financial year, it will settle the proposed $145 million sale of its finance group to GE Finance & Insurance Ltd.

Pacific Retail’s $55.4 million profit in the September 2004 half included earnings from the New Zealand appliance & furniture business and the gain on sale of that business.But for the September 2005 half, it had none of these gains: “The half-year result reflects PRG’s commitment to ongoing investment in its major operating businesses, with no gains on sale for the period. Due to the nature of PRG’s business as an investment company, financial results are a combination of operating company earnings and gains on sale of part or all of its investments in those businesses,” Mr Irvine said.The finance group & Bendon both reported significant increases in gross revenue, but Mr Irvine said a new accounting treatment of the finance group’s insurance business impacted on short-term profit, while Bendon continued to invest in its international expansion. Group gross revenue fell from $539.8 million, which included $167.8 million from the appliance & retail business (Noel Leeming, Bond & Bond, Big Byte and Noel Leeming Furniture), to $314.4 million.

Gross revenue from UK appliance retailer PowerHouse fell by $78.8 million to $188.8 million, which Pacific Retail attributed to foreign exchange impacts, reduced store numbers & continued difficult trading conditions in the UK.The group’s net operating deficit was $36.3 million, up from a $30.5 million deficit last year. But Mr Irvine said the 2004 figure included a $5.4 million trading profit from the appliance & furniture business.Group equity fell from $127.5 million to $80.8 million. Bank loans (excluding the finance group) were up from $22.1 million to $24.8 million.

Fully consolidated, group assets rose from $710.1 million to $833.8 million, including a rise in finance group assets under management of nearly $100 million – from $518.9 million to $616.4 million. The new total includes securitised receivables not previously reported on the balance sheet.Mr Irvine said the finance group made $4.1 million pretax (down from $14.7 million) on revenue up by $10 million to $62.4 million, but the result would have been a $12.5 million profit (still down) if the accounting treatment hadn’t changed to reflect the transitional impact on profit recognition from a change to the accounting treatment of insurance premiums received.The finance group’s highest-profile company, Pacific Retail Finance Ltd, increased pretax profit by $1 million to $7.1 million.Bendon delivered $358,000 ebita ($1.8 million) on $57.2 million ($48.4 million) gross operating revenue. Mr Irvine said Bendon continued to implement its export growth plans across a number of markets and the consequent increase in expenses resulted in “a short-term profitability erosion. This is in line with expectations and is projected to reverse in 2007.”Bendon has opened its international head office on a 1.6ha site at the corner of George Bolt Drive & Montgomerie Rd, near Auckland International Airport, and work has started on a new Australasian warehouse at that property, which will be commissioned in the June 2006 quarter. The facility will include an extra 7900m² of purpose-built, high-stud warehousing & office space. It’s being built by Pacific Retail Properties.

Pacific Retail Properties expanded its management services and contracted to assist Repco to secure new retail sites throughout New Zealand, while at the same time continuing with development activities. It improved ebita to $352,000 from a $217,000 loss.Pacific Retail has completed a 2-year restructure at Living & Giving, with a $1 million ebita loss on revenue down from $6.2 million to $4.8 million. In the September 2004 half, the ebita loss was $2.3 million, which included $1 million of one-off closure & lease exit costs. The chain is down from 14 to 10 stores.

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Everybody should have a rating, says Pacific Retail Finance chief

Published: 3 July 2005

Pacific Retail Group Ltd subsidiary Pacific Retail Finance Ltd has received credit ratings from 2 international agencies, and finance arm chief executive Greg Cathcart said everybody in the business of raising money from the public should have one.

Pacific Retail Finance scored a B3 from Rapid Ratings & a BB- from Standard & Poor’s. Mr Cathcart said the company sought the ratings “in response to a growing demand by intermediaries & investors for finance companies to be rated.He said Rapid Ratings noted in its ratings report that “overall, PRF has been achieving very good financial results. It has a good record of profitability and is performing at a high level of financial efficiency”.Standard & Poor’s told him its rating was based on Pacific Retail Finance’s “acceptable risk-based capitalisation, solid earnings record & reasonable geographic diversification”. Moderating that were the relatively small size of the New Zealand market & the potential impact on the company of any possible economic downturn.Mr Cathcart said Pacific Retail Finance was satisfied with its ratings, which gave intermediaries & investors a benchmark for evaluating the company. It’s projecting continued strong growth in both market share & underlying profitability and Mr Cathcart said it would work to further improve its ratings.He said he believed any institution raising public money should have a publicly disclosed rating: “The Securities Commission’s recent report into finance company disclosure makes it very clear that it considers a rating is material information that should be in the public domain. We endorse this approach as we believe that the increasing disclosure of ratings will allow more transparent & meaningful comparison between industry participants.”

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Plenty of red ink through PRG accounts despite profit

Published: 30 May 2005

Pacific Retail Group Ltd turned round from a $22.6 million loss in 2004 to a $46.6 million net profit after tax for the March 2005 year, but some of its retail businesses remain in poor shape.

And because the sale of its finance group is up in the air, it won’t be paying a final dividend just yet.

PRG chairman Maurice Kidd & acting chief executive Steve Smith said Pacific Retail Group made the transition into being an investment company during the year. But they also said its outlook for the next year would be driven by the performance of its 3 major operating businesses – PowerHouse in the UK, Bendon and Living & Giving – and on the outcome of selling the Pacific Retail finance group business.

“PRG is now targeting significant improvements in the performances of both Bendon & PowerHouse, capitalising on the hard work that has been put into developing both of these businesses in the 2005 financial year,” they said.

That’s the shiny side of the coin. On the other side, PowerHouse made another loss, Bendon’s ebita was halved, Living & Giving made another loss and Pacific Retail Properties went from profit to loss. The business that’s being sold, Pacific Retail Finance Ltd, increased its profit by 57%.

PoerHouse loses $51 million

The big downward driver last year was the PowerHouse business in Britain, which made a $46.4 million ebita loss in its first 7 months of PRG ownership, to March 2004, and lost another $51.4 million in the March 2005 year on $590.6 million revenue.

It got same-store sales up 20% in the March half, launched 12 “Centre of Excellence” stores and cut total store numbers by 22 to 112. PowerHouse is still forecasting a loss for 2006 but directors are targeting break-even for 2007.

PRG realised an $86.7 million capital gain from the sale of its New Zealand appliance & furniture business – Noel Leeming, Bond & Bond and Noel Leeming Furniture – completed last August.Finance group sale announcement early June

Mr Kidd & Mr Smith said directors were continuing with a proposal to sell PRG’s finance group. They expect to announce timeframes & process in early June. On a fully consolidated basis, the group’s total assets increased from $682.4 million to $840.8 million, of which the finance group contribution rose from $382.8 million to $577.6 million.

Pacific Retail Finance Ltd increased pretax profit by 57% to $13.7 million. Because of the proposed finance group sale, directors deferred a decision on a final dividend.

Bendon profit halved

Bendon’s ebita fell by 49%, from $10.7 million to $5.5 million, on gross operating revenue up $4 million to $113.9 million. Mr Kidd & Mr Smith had this to say: “The financial result at face value hides the considerable progress achieved by Bendon during the year towards its objective of becoming a respected & highly valuable international design & marketing-led lingerie company.”

Causes for the decline seemed to be:

$1 million set-up costs for the new Elle Macpherson Intimates agreement
higher costs than anticipated to introduce a new IT system
“less expansive trading conditions” in Australia & New Zealand
a significant decline in discount department store revenue “due to sourcing policy changes from some of those customers”, and
sales patterns to major Australian wholesale customers slowed due to trading patterns & stockholding policies”.

Mr Kidd & Mr Smith said Bendon had more infrastructure changes to come, particularly relating to supplies, and would open more stores in Australia & New Zealand. They said Bendon should become much more profitable by the 2007 year as it reaps the benefits of contribution margin growth from the UK, North America & Gulf States, offsetting its higher cost base.

Living & Giving completes restructure

The Living & Giving business completed a 2-year restructuring & repositioning programme, which involved closing 6 non-strategic stores and overhauling the product range. The Living & Giving intangible assets were written down from $1.9 million to zero.Gross operating revenue fell 23% to $15.1 million. Closure & lease exit costs rose from $150,000 to $1.4 million, but Mr Kidd & Mr Smith said the ebita loss (excluding those exit costs) was much better, down from $2.75 million to $1.7 million. They expect Living & Giving to make a small profit in 2006.

Property division looks at new building on Airpark site

Pacific Retail Properties unconditionally sold its Invercargill property for $5.2 million, with settlement due in June, and has retained a 1.6ha Airpark block near Auckland International Airport. Bendon’s new head office was completed on the front of this site and another development on the rest of it is expected this year.Pacific Retail Properties went from a $4.6 million ebita profit last year to a $16,000 loss this time. Mr Kidd & Mr Smith said the gain on sale of the Invercargill property was offset by write-offs associated with other completed or discontinued projects.The division’s business has been based on its property management services contract, including a contract with the Noel Leeming Group, entered into as part of the sale of the New Zealand appliance & furniture business. If you want to comment on this story, write to the BD Central Discussion forum or send an email to [email protected].

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Pacific Retail looks at finance group float

Pacific Retail Group Ltd is considering listing its finance group next year.PRG would retain a majority interest in the listed finance company. It said it would scope a proposal for an initial public offering of shares in the first quarter of 2005 for a listing in the 2nd quarter.The proposed IPO reflected the standing of the finance group as a substantial business in its own right, on track for a record $28-$30 million pretax profit for the March 2005 year, and already with assets of more than $500 million under management.The PRG finance group is a specialist consumer finance company, the 3rd largest in the New Zealand market, with a platform for growth based on more than 200,000 active customers.PRG acting chief executive Steve Smith said the listing was a natural step for such a strong performer. “The finance group already has significant market presence through its debenture, hire-purchase & consumer-loans business. Extending further into capital markets is a logical progression,” he said.”The listing will give the finance group greater autonomy & an even stronger market profile, as well as provide funding flexibility to keep pace with rapid projected growth and the resulting enhanced equity requirements.”The proposed listing is also in line with PRG’s investment approach, allowing the parent company to retain a majority shareholding while unlocking maximum value growth potential for the finance group.”As an investment company in the consumer sector, PRG is focused on managing & adding value to a portfolio of consumer-oriented operating businesses. This listing will further deliver on our vision of providing maximum value for shareholders.”The PRG board anticipated that a finance group listing would include a preferential share entitlement for PRG shareholders & noteholders. The finance group is the largest of PRG’s operating businesses and has grown its pretax profit from $5.7 million in the March 2001 year to $14.9 million in the March 2004 year, with a forecast $28-$30 million to March 2005. Assets under management have grown from $167.9 million in the March 2001 year to $516.8 million in the March 2004 year. The finance group comprises 3 100% subsidiaries – Pacific Retail Finance Ltd, Pacific Retail Services Ltd & Montreal Financial Services Ltd. It offers a range of financial products, with issues of debenture stock used to fund personal loans and also provision of hire-purchase contracts through retailers.

Mr Smith said that because the consumer lending portfolio was made up of relatively small parcels of debt, spread across a large customer base, it offered a spread of asset risk for the finance group & its debenture investors. The finance group also continued to benefit from an exclusive 10-year contract to provide consumer hire-purchase funding for the Noel Leeming Group, which has been sold by Pacific Retail Group.As part of the listing process, PRG plans to appoint independent directors to the finance group board, cementing a strong management structure.Mr Smith said the finance group planned to continue building its penetration into the personal loans market, launch new finance products in complementary areas, ensure its business systems are streamlined to optimise further growth and strengthen its brand presence in the overall financial services field.He said PRG directors would continue to consider further initiatives to maximise shareholder value throughout the PRG portfolio.

The company intended to make presentations to the broking community from late January, further detailing its investment approach, portfolio companies & the above initiatives, and would give shareholders an update in the New Year.

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