K&D forced to tighten its belt as tough trading conditions result in $9.8 million loss

EMBATTLED hardware retailer Kemp and Denning Limited has embraced an aggressive cost reduction culture after recording a $9.8 million loss.

Tough conditions in retail and trade has seen Kemp and Denning’s revenue cut from $89 million to $67 million. Picture: MATHEW FARRELL

EMBATTLED hardware retailer Kemp and Denning Limited has embraced an aggressive cost reduction culture after recording a $9.8 million loss in 2016-17.

Competition resulted in an 18 per cent reduction in revenue from $89 million to $67 million.

The after-tax loss increased from $558,846 to $9.83 million.

General manager Jason Hutton said it had been a period of particularly tough and adverse conditions for retail and trade.

“Both markets have been very competitive with challenges around sales and margin retention,” he said in his report.

“In response the Board and management determined that in order to remain viable we must simplify our operations and implement an aggressive cost reduction culture.”

Chairman Greg Goodman said directors had taken decisive action to restructure the organisation with the closure of unprofitable operations in Devonport and Glenorchy and the sale of the trade division to Clennetts Mitre 10.

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“The sales have significantly strengthened our balance sheet and facilitated the repayment of all outstanding debt [$6.8 million],” he said.

“The board decided to sell the trade business to eliminate ongoing operating risk and ensure shareholder value was preserved.

“Excellent progress has been made in the reduction of operating costs and working capital.”

It plans to sell the land and buildings at Kingston by the end of September.

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Kemp and Denning closed its Cambridge store, despite an ongoing lease going through until March 2018.

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The company’s annual report says K&D has a strong balance sheet, assets of $38 million compared with liabilities of $14 million, and a clear strategy to get more value out of its real estate holdings.

‘To maximise our impact we will increasingly look for opportunities to maximise the benefit of these properties,” the directors report to shareholders said.

The export reveals that the K&D’s continuing operation in Melville St earned $22 million revenue but contributed $4.5 mllion to the loss.

The discontinued operations, including Glenorchy and Devonport, earned $44 million in revenue in the year to May but lost $5.2 million.

Kemp and Denning Limited is a 94-year-old public unlisted company substantially owned by the Kemp family.

The market capitalisation of the 2,683,635 shares has dropped from more than $30 million to about $7 million over the past five years.