Picture brighter at Noel Leeming

After a tough trading period, the Noel Leeming Group is eyeing a return to profit as competitors fall by the wayside.

Noel Leeming's parent, Britain's Gresham Private Equity, injected $15 million into the group, which includes Bond & Bond, last April after the appliances, electronics and technology retailer breached its banking covenants. A recent Companies Office filing shows it followed a $4.4m net loss in the year to March 2009, down from a profit of $6.4m the previous year.

However, former Warehouse Group head of merchandising John Journee, who replaced Andrew Dutkiewicz as Noel Leeming's chief executive last March, said the group was forecast to return to profit in the year to March 2010. Mr Journee said business began picking up in the second half of 2009 and this continued into January.

"It has been at the expense of some of our competitors which we're not shedding too many tears over."

Times are tough in the sector with KordaMentha appointed receivers to Eastern Hi-Fi Group last week soon after Australian group JB Hi-Fi closed its four Hill and Stewart appliance stores in Auckland.

Mr Journee said that in the past year Noel Leeming and Bond & Bond had been reasserting their positions in the marketplace after previously not fighting hard enough against rivals such as Harvey Norman. He said the group, whose retail heritage dates back about 100 years, had done this by being more aggressive on the shop floor.

"I think we're just starting to get customers back and say: `Look, they don't have to go to new, shiny stores. The stores that were there and serving the catchment are as good as we need'."

The 2009 accounts show the Noel Leeming Group's gross margin fell to 21 per cent from 23 per cent in 2008. But Mr Journee said the company was now well ahead of the financial targets required to meet its bank covenants.

As of March 31, the group had $77.2m of debt with Lloyds TSB subsidiary BOS International Australia plus a $15m working capital facility, of which $12m was drawn. Noel Leeming coughed up $9.2m in annual interest payments on the bank debt.

Although private equity groups typically own businesses for only three to five years, Mr Journee said Gresham – which bought Noel Leeming from Eric Watson's Pacific Retail Group for $138.5m in 2004 – was acting like a mid-term owner and supporting business decisions with a medium-term horizon.

- © Fairfax NZ News