Reject Shop’s profits dive

Board still urges shareholders to reject takeover

THE Reject Shop is still urging shareholders to reject a $78 million takeover bid despite the retailer slashing its dividend following a 40 per cent drop in first-half profit.

The under-pressure discount retailer’s net profit fell to $10.6 million in the six months to December 31, from $17.7 million the same time last year. Sales fell 1.1 per cent to $432.7 million despite what the company said was a successful Christmas period.

The board expects a second-half loss and has downgraded its full-year guidance to between $3.1 million and $4.1 million.

The company slashed its dividend from 24 cents a year ago to a fully franked 10 cents.

Nonetheless, The Reject Shop again dismissed concerns about its performance raised by the Allensford Group, which has made a $78 million bid that the target company has called “inadequate and highly opportunistic”.

In a letter to shareholders released yesterday, directors urged them to reject Allensford’s offer and “do nothing”.

“Shareholders are cautioned to take care in reacting to the bidder’s speculative comments, whether in formal takeover documents or in the press,” the letter states.

The board said Allensford’s offer failed to take into account the company’s plans for growth.

Managing director Ross Sudano (pictured) said the company aimed to reposition itself as a leader in Australia’s greeting card and home storage markets.

“This has been an extremely challenging period to be operating a retail business and the retail sector as a whole has felt the impacts of lower consumer confidence, flat wages, changing spending patterns and the rise in energy costs,” Mr Sudano said in a statement. “Our business will emerge from this period in fundamentally better shape and able to better withstand the external shocks of the weak retail environment.”

Shares in The Reject Shop hit a 14-year low of $2.00 in November, down 87 per cent from their all-time high of $15.36 in August 2016.

Allensford – controlled by packaging billionaire Raphael Germinder’s family group – called the sales decline “terminal”.

“TRS shareholders have an important decision to make on whether to accept the certainty of the Allensford cash offer or risk ongoing exposure to the TRS business under a failing strategy at a time when the retail trading environment is challenging,” Allensford director Nick Perkins said.