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Premier Investments maintains high dividends despite slowing growth

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2023-09-28

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Solomon Lew's Premier Investments has maintained its dividends for the 2022-23 financial year at the high level established a year ago, despite reporting slowing growth in revenue and earnings from its key retail businesses.

The company announced on Thursday that the 2023-24 financial year had started weakly, with sales down in the first month and a half. Additionally, there was little information provided about the progress of the strategic review revealed earlier this year.

The company stated, "The Strategic Review currently underway will assist in assessing the optimal future structure for the Group to ensure it is best positioned to continue to maximize growth opportunities for Premier Retail’s portfolio of iconic brands," in the release on the mooted revamp.

More importantly, the weak start to the new financial year was a cause for concern for many investors. Premier Retail reported a 2.0% decline in global sales in the first six weeks from July 30, compared to a record first half in 2022-23, which saw an 18.1% increase.

"The Group is focused on the key Christmas trading quarter ahead, noting that results for the first half are always driven by this critical period,” Premier said.

Premier's decision to maintain a high dividend payout for 2022-23 followed the previous year's decision to add a 25 cent payout to the final, making it 79 cents a share and 125 cents a share for that year.

On Thursday, the company revealed a total payout of 130 cents a share (fully franked) for the latest year, after a final dividend of 60 cents (up six cents from the 54 cents paid the year before, before the special payment). The interim dividend for 2022-24 was 70 cents a share, up from 46 cents.

Premier stated that the latest increase in dividends took the payout for the past three years (including 2022-23) to over half a billion dollars. With a 45% stake in Premier, Mr. Lew has or will receive more than $202 million.

Looking at the 2022-23 results, total revenue was up more than 10% at $1.662 billion for the year ending July 29, while the retail arm saw a 9.7% rise to $1.643 billion.

Statutory net profit of $271.1 million was down 5% from the previous year. Naturally, Premier emphasized the better-looking profit line - the non-standard adjusted figure of $278.6 million, which showed a 6.4% improvement.

The key measure for a retailer like Premier was its EBIT result (Earnings before interest and tax). Premier said that totaled $356.4 million (excluding significant items, or again, 'adjusted'), up 6.4%.

The year saw record sales from its main businesses - Peter Alexander's sales rose 11.8% from the previous year to a record $478.9 million, Smiggle’s global sales jumped 22.4% to $319.8 million from 2022-22, and its Apparel Brands saw a 4.6% lift in sales to a record $844.8 million (Apparel Brands include Just Jeans, Jay Jays, Portmans, Dotti, and Jacqui E chains).

All three businesses closed a total of 98 stores during the year. Despite that, Premier revealed plans for a significant expansion in the Middle East for the Smiggle stationery chain, with 20 stand-alone stores planned by the end of 2024 and 60 in that region over the next decade.

Apart from Premier Retail, the company has some high-profile businesses - its 26% stake in Breville had a market value of $829.3 million at July 29 (balance sheet value of $333.7 million). At year-end, the investment in Myer Holdings Limited had a market value of $137.7 million (balance sheet value of $125.1 million).

Premier said it started equity accounting for the Myer investment during FY23 and acquired an additional 3% of Myer after the balance date.

Closing cash on hand at July 29 was $417.6 million after distributing $237.2 million in fully franked dividends to shareholders during the year.

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