No Problems For Djs As Profit Soars

The Age

Thursday September 25, 2008

Ari Sharp, retail reporter

STRONG cash flow is shielding David Jones from tightening global debt markets, with the department store saying it will have no need for debt funding, other than its existing $350million facility.

The bumper cash flow came as the company announced its best result since listing in 1995, with profit after tax of $137.1million for the year to July, up 25.1% on a year earlier. For the year ahead, the company has set modest guidance of 5-10% net profit growth, forecasting "three tough quarters" leading up to April.

A combination of the $128.3million in cash flow, 11% up on a year earlier, and the sale of its Bourke Street store allowed the company to retire $85million of debt. This leaves it with a $350 million bank facility, of which less than half has been drawn down, that extends until 2012.

The ability to fund its capital expenditure through cash flow and existing facilities will make David Jones the envy of other companies, given the scarcity of debt funding available.

It will also give the company a free hand to pursue its ambitious growth strategy that involves opening up to eight stores by the middle of 2012.

Chief executive Mark McInnes denied that the decision to launch mid-season sales last week, a fortnight ahead of the past two years, was a knee-jerk response to slowing sales, arguing it had been planned for some time and was influenced by factors such as school holiday dates.

"We expected the overall environment to be pretty tough," he said.

"The areas that are under duress are the more consumer discretionary things like bedding and furniture and fridges, where if you don't have to have a replacement, you don't buy a new one."

But sales of cosmetics and women's clothing had been stronger.

David Jones will next week launch a co-branded credit card with American Express, offering spending rewards from within its stores.

The company will pay a 16 fully franked final dividend, bringing the full-year dividend to 27, up 22.7%. The final dividend will be paid on November 5. David Jones shares were unchanged at $4.39.

LINK

? www.davidjones.com.au

© 2008 The Age

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