Lower retail prices lifted sales volumes sharply and propelled leading IT retailer, Connection Group, to a 35% increase in headline earnings to 92.2c (2003: 68.1c) in the year to end August.
With strong cash flows, Connection Group has increased its dividend 39% to 25c (2003: 18c) per share.
SA`s premier IT retailer reports turnover from continuing operations up 17% to R791 million, while operating profit before interest surged 20% to R41 million.
The increase in turnover occurred against a 20% decrease in retail selling prices, suggesting a volume increase of nearly 40%.
Chief Executive Grattan Kirk writes: "Categories such as notebooks and personal computers, multifunction printers, entertainment and digital photography have shown substantial growth."
Strong profits and working capital management generated R62.5 million cash from operations. The company ended the financial year with cash holdings of R81.1 million notwithstanding the outlay of R29 million on the purchase of the 16 Photo Connection outlets.
Incredible Connection opened three stores during the year in Pietermaritzburg, Century City, Cape Town and Riverside Mall in Nelspruit. These brought the total number of outlets to 32 with 21 700 square metres of trading space. Two stores would relocate and one new outlet would open before Christmas.
Incredible Connection also refurbished a number of stores to improve their look and feel and bring them more into line with the new technology on offer.
The effective tax rate rose to 30.5% (27.8%) largely because of the payment of STC on last year`s dividend.
The 16 Photo Connection stores have been successfully integrated and are performing to expectations. Kirk confirmed that the group is "very pleased" with the performance of Photo Connection in the six months since acquisition. The unit generated a pre-tax profit of R2.8 million on R20.3 million of turnover. A number of the stores acquired are in the process of being revamped and three new Photo Connection stores will soon open in malls around SA.
Last week Connection announced that it had increased its investment in photography through the purchase of Beyond IT, an upmarket 12-store chain in Johannesburg, for R30 million. Beyond IT made a pre-tax profit of R3.5 million in the six months to February 2004. Had it been part of the group last year, it would have increased headline earnings per share by 15%. The management of Beyond IT is staying on board and will assume operational responsibility for all 29 Photo Connection`s stores.
Kirk says digital photography is a high-growth, high-technology extension of computing and was therefore a logical addition of Connection`s business.
Kirk said he was extremely pleased with the results. "The market was buoyant, we maintained profitability in spite of falling prices and we enjoyed strong cash flows.
"We are very optimistic about our long-term growth opportunities as the penetration levels in the home computing market are less than 20%, which means we are far from saturation."
Share
Editorial contacts