PPGL Proposes Sale of SchoolTex Business

PPGL Proposes Sale of SchoolTex Business

Postie Plus Group (PPGL, NZX: PPG) today announces it has agreed to a non-binding offer to sell its school uniform operation SchoolTex for $9m.

The transaction is conditional on shareholder approval at PPGL Annual Shareholders Meeting to be held in Christchurch on 20 December 2013 and the completion of due diligence and formal documentation. The proposed buyer is a well-known New Zealand company that wishes to keep its identity confidential until the agreement becomes unconditional.

Details of the transaction and the necessary shareholder resolutions are set out in the PPGL Notice of Meeting and Explanatory Memorandum, sent to shareholders today.

PPGL’s newly-appointed Chief Executive Richard Binns said: “The PPGL Board and Management believe this transaction is an excellent opportunity to realise value for PPGL shareholders and put in place a structure on which the company can build a brighter future.

“We see considerable opportunity to continue to grow and lift PPGL profitability by enhancing our clothing and health and beauty product ranges and by investigating complementary product lines.

However, our debt load of $21.1 million represents a significant challenge to realising this vision.

“The proposed sale of SchoolTex is a substantial step towards resolving this issue,” Mr Binns said.

“SchoolTex is a highly seasonal business and one that does not drive incremental sales or lift the average ‘basket size’ in Postie Plus stores. Outside the peak uniform-buying season, SchoolTex is

only marginally relevant to the broader product range. It also places significant capital demands on our business, requiring a substantial investment in inventory ahead of the peak season.

“The SchoolTex sale is forecast to cut PPGL’s debt load to $12.2 million. It will open up valuable real estate within our stores for products that have the potential to drive increases in average basket size and deliver comparable or higher margins year round.

“We forecast these initiatives can generate an additional $5 million in sales to the core Postie brand partially offsetting the loss of SchoolTex revenue. Meanwhile, we forecast improvements in operating costs and a better product mix will provide a lift to earnings.

“Over the course of our 104-year history, PPGL has built an enviable position in the New Zealand retail market. We are synonymous with great value clothing for the whole family. We benefit from a nationwide network of stores across provincial and metropolitan centres and an emerging online retail presence.

“The PPGL Board and Management and our independent advisors believe the sale of SchoolTex is the right step for PPGL. It will allow us to put in place the foundations for a sustainable future and realise the value we see residing in the business.”

ends

© Scoop Media