Postie Plus plunges deeper into the red with $11.6 mln loss, faces tight cash flow
Postie Plus [NZX: PPG], the retailer whose shares are the worst performer on the NZX this year, plunged deeper into the red after its poorly executed outsourcing deal for a distribution centre in Mangere disrupted the business, and has left it relying on its banks to keep it cash-flow positive.
The Auckland-based retailer's loss widened to $11.6 million, or 29.12 cents per share, in the 12 months ended Aug. 4 from a loss of $183,000, or 0.46 cents, a year earlier, it said in a statement after the close of trading. Sales dropped 11 percent to $84.2 million, and Postie Plus had to write off a $3.09 million tax asset, $2.46 million in inventory and wear $880,000 in restructuring costs.
The retailer had an operating cash outflow of $4.66 million, with a further $1.95 million outflow from its investing activities. That left it to borrow $7 million in the year to keep its cash balance at just $77,000 as at Aug. 4, with its bankers providing additional support and reserving their rights over outstanding covenant breaches as the retailer looks at raising capital. As at Aug. 4 its borrowings due in the next 12 months was $16.76 million.
"The unexpected disruption to distribution which began in the first half of the trading year was not resolved until well into the second half, deeply impacting our stock levels in store, subsequent sales revenue and gross margin," chairman Richard Punter said. "The distribution change completely knocked us off course."
Last year Postie Plus outsourced its distribution systems and processes to a purpose-built centre in Mangere as part of its shift to Auckland, where it saw greater opportunities.
The shares fell 5.8 percent to 11.3 cents today, adding to its 50 percent dive this year. That values the retailer at $4.5 million.
Punter said the company has stabilised its distribution and is working to improve medium term gross margin.
"We are still recovering from the damage to market share suffered in the second half of the year," he said.