Hopes for Portmans' profit in two years

Premier Investments Ltd says its underperforming Portmans brand is expected to return to profitability within two years, after dragging down the group's first half results.

The investment company, whose chairman is businessman Solomon Lew, also telegraphed that it has had discussions with parties about acquisitions and would inform the market "hopefully in this coming half".

Premier, which also owns the Just Jeans, Jay Jays and Peter Alexander brands, unveiled a 13.7 per cent drop in first half 2009/10 statutory net profit to $42.44 million after a decline in interest earned on cash reserves.

Operating profit was $61.2 million for the first half to January 30, on a 6.3 per cent rise in revenue to $483.99 million.

However, the first half was for 27 weeks compared with 29 weeks for the previous corresponding first half, making comparisons difficult to assess.

Sales for the 27 weeks were up 9.3 per cent to $473 million.

Mr Lew admitted that Portmans, the women's wear brand within its Just Group, was running at a loss, after overhauling its management team over the past 12 months.

Portmans' first half like-for-like sales plummeted 18.5 per cent and cut seven per cent from Just Group's EBIT.

Mr Lew said the team had taken a while to "get to grips with the marketplace" and he expected Portmans to return to profitability within two years after benefits from changes made by Just Group's managing director Jason Murray kicked in.

"Jason has made the changes and we expect ... especially over the next 12 months, but (by) the time 24 months comes about to be very heavily in profit."

"We've increased our EBIT by over 12 per cent, and if Portmans had made a profit it would have been well over 20 or 25 per cent," Mr Lew said.

However, analysts questioned if Portmans could be revived by 2012.

Citi analysts Craig Woolford and Andy Bowley noted Portmans' "very weak" performance, and said Just Group's poor sales momentum would continue in the second half.

Mr Lew told reporters at the company's results briefing that Premier was considering both domestic and offshore opportunities and there had been surge in US and European retailers expressing interest.

"We are being pursued monthly by operators offshore, especially at this point in time when growth is falling behind in the overseas markets."

Premier has $325.2 million in cash from which to make acquisitions.

Premier did not issue guidance but said it was "cautiously optimistic" about the second half outlook although Mr Lew said consumers had been spooked by rising interest rates and the withdrawal of federal government stimulus payments.

Heavy discounting and ferocious cost cutting undertaken by competitors would not work over the long term, he said.

Mr Murray said it was distracting to talk about current trading because it would make a minimal difference to the half.

"There isn't an answer or a pattern that would be worth talking about."

Premier declared a fully franked interim dividend of 38 cents per share.

Premier's shares dropped 34 cents, or 3.77 per cent, to $8.67.