SA backer keeps the faith in Godfreys

SHARES in vacuum cleaner retailer Godfreys slumped to a record low on Thursday after the group warned of a looming half-year loss, hitting most investors hard – but it has not fazed its largest backer, 99-year-old South Australian John Johnston.

File photo of mid-year sales at a Godfreys store.

SHARES in vacuum cleaner retailer Godfreys slumped to a record low on Thursday after the group warned of a looming half-year loss, hitting most investors hard – but it has not fazed its largest backer, 99-year-old South Australian John Johnston.

Shares in Godfreys closed 16.9 per cent lower at 32c, their lowest value since the company listed on the ASX in December 2014.

Mr Johnston owns more than 28 per cent of Godfreys and is the group’s largest shareholder through his Adelaide company Arcade Finance.

Entities controlled by Mr Johnston also have lease arrangements with Godfreys for 11 store sites and another entity related to Arcade Finance, 1918 Finance, also provided a three-year $30 million debt facility to Godfreys last year.

“Mr Johnston continues to be supportive of the new board and the chief executive (Jason Gowie) and has been a long-time supporter of the business,” a spokesman for Mr Johnston told The Advertiser yesterday.

Jason Gowie was appointed chief executive of Godfreys in December last year.

The group which has 222 stores, 21 of them in SA, yesterday said sales during the Christmas period were weak and it warned impairments could lead to a half-year loss of about $59 million.

Godfreys said it expected underlying earnings of $3.6 million for the first half of the financial year, down from $6.3 million a year earlier, after trade in December was weaker than expected. Like-for-like sales in October and November were also disappointing.

Unaudited like-for-like sales for the six months to December 29 were 6.2 per cent lower than in the same period a year earlier, the company said.

Godfreys has also slowed the conversion of its stores to franchises, as it works to improve its core business in order to maximise the sale value of those conversions.

It said yesterday that its weaker sales and the reduction in conversions of stores to franchises would require a further impairment of goodwill and intangibles, expected to be $75 million before tax.

If the impairment is recognised in its accounts for the 2017-18 first half, Godfreys expects to post a net loss of about $59 million, it said.

The company will release its half-year financial results on February 20, along with an updated forecast for annual underlying earnings.

Godfreys was founded in the 1930s by Godfrey Cohen who met Mr Johnston, his Adelaide partner, in 1936, which eventually led to the store network being established and expanded across Australia and New Zealand. Mr Johnston was actively involved in the operations for more than 70 years until the group sold for the first time in 2006.

He bought it back five years later in partnership with other companies before it subsequently listed in 2014.

Mr Johnston made close to $16 million by selling half his stake in that public float.

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