WHEN I LAST WROTE ABOUT House of Busby ( Finweek, 2 November 2006), it was just launching its first Mango shop in Sandton City. My fashionista spies were less than impressed by the initial range of merchandise and there’s no reference to how Mango is faring in the interim report to 31 December, but the SA retail division as a whole did better than expected, as did the Australian distribution division.
The problem area was the SA distribution divisions, which were hit by the depreciating and volatile rand. Busby says the recent more stable rand should help these divisions return to their normal profitability. The Australian business contributed only 26% of revenue, up from just 12% a year before, but generated 43% of EBITDA, which confirms that the local distribution businesses indeed must have had a torrid time. However, overall revenue was up 52%, operating income up 31% and HEPS up 32%, to give a rolling 12-month HEPS of 111c. Busby does not declare an interim dividend: the last annual payment was 14c. OPPORTUNITIES • However Mango fares, there’s a worldwide retail trend towards branded goods, and Busby is a leader in exploiting them locally. Unlike most SA retailers who’ve tried, Busby seems to have cracked the tough Australian market, giving it an unexpected status as a rand hedge stock. RISKS • The misfortunes of the SA distribution businesses show how vulnerable Busby is to fluctuations in the rand. Brands are inherently a fickle business, and Busby can’t expect every brand it introduces here to do well. But as the portfolio expands, the exposure to any individual brand diminishes.