Woolworths takeover target Country Road expects earnings before interest and tax to rise as much as 66 per cent to $100.9 million in the year ending June, as it reaps the benefit of its $172 million acquisition of Witchery and Mimco in 2012.
In a trading update on Monday, Country Road forecast earnings before interest and tax between $92.9 million and $100.9 million for the year, 52.8 per cent to 66 per cent higher than the $60.8 million result booked in 2013, which included only 10 months’ contribution from Witchery and Mimco.
Earnings before interest, tax, depreciation and amortisation are expected to rise by between 41 per cent and 50.8 per cent to between $115.7 million and $123.7 million.
Earnings per share are expected to rise by between 40.1 per cent and 57.2 per cent to between 60.9¢ and 68.3¢.
The profit guidance followed strong sales growth in Australia and South Africa across Country Road’s four brands – Country Road, Trenery, Witchery and Mimco.
Country Road bought Witchery and Mimco from Gresham Private Equity in 2012 for $172 million, creating Australia’s third largest apparel retailer.
Total sales rose 20.3 per cent to $849.6 million, with same-store sales rising 8 per cent. Sales in Australia rose 20.3 per cent to $759.3 million, with same-store sales up 7.2 per cent, while sales made in South African rand rose by 25.8 per cent and same-store sales by 18.1 per cent.
“We are pleased to have delivered continued strong growth in sales and profit for the full financial year despite some challenging market headwinds from increased competition, unseasonably warm weather and contractionary fiscal policy in the second half of the financial year,” said Country Road chief executive Iain Nairn.
Woolworths owns 88 per cent of Country Road and has offered $17 a share to buy out minorities, including 11.8 per cent shareholder Solomon Lew.
Mr Lew emerged with a 9.9 per cent stake in David Jones last month and was threatening to block Woolworths’ $2.2 billion acquisition of the department store chain unless Woolworths bought him out of Country Road at a massive premium.
Woolworths’ offer values the apparel retailer at $1.76 billion and Mr Lew’s stake at $209 million.
Based on Country Road’s new guidance, Woolworths’ $17 a share offer values Country Road at a multiple of 26.3 times earnings per share and represents an EV/EBITDA multiple (including debt) of 15.3.
In comparison, Woolworths’ $4 a share offer for David Jones values the department store chain at 25 times forecast 2014 earnings per share and 11.9 times EV/EBITDA.
Country Road has flagged further strong profit growth in 2015, when a new distribution centre is completed.
The unaudited sales results were released ahead of the despatch of an independent experts report on the Woolworths offer later this month.
This story Administrator ready to work first appeared on Nanjing Night Net.