News

« Headlines

Sales down, profit up at Premier Direct

02.04.08 Alison Flood

Workplace books and gift seller Premier Direct saw its turnover fall by £2m to £10.7m in the six months to end-January 2008, compared to the same period last year. Operating profit was up 17% over the period to £1.3m, while gross margins improved to 39.5% from 36.3% in 2007.

"A reduced overhead and improvements made to the operational structure have proved highly beneficial, establishing a strong foundation on which to build," said c.e.o. Eric McClenaghan. "PDG has not been immune to the retail downturn as the reduction in turnover testifies. However, our ability to grow gross margins while maintaining tight control of costs has helped us to deliver creditable profits in the first half of the year."

Premier Direct reduced its administrative expenses by £0.6m over the six months thanks to tighter cost controls, particularly warehousing and staff costs, and spending on distributor recruitment.

One of the sales initiatives the group trialled in the period was to increase the number of sales cycles in the run up to Christmas, changing the sales cycle in the 12 weeks before Christmas 2007 to four weeks from six weeks. It said that although an increase in sales was generated, the improvement was lower than anticipated.

It also pointed to problems with the IT system it installed in the summer, which it said generated misleading information as to active distributor numbers, which directly led to an over-purchasing of stock.

These two factors led to Premier Direct holding £1.5m more non-seasonal stock than it required, and it therefore had to secure new additional short-term bank financing of £1m in January to meet its short-term financing requirements. The loan has been repaid with the proceeds of a placing, which took place early in the second half, the group added, with £1.2m raised, including £430,000 from directors. However, the business' net interest charge of £0.4m was £0.1m higher than last year as a result of the £0.1 million arrangement fee for the short-term bank financing.

Premier Direct said it expected its results for the year to end-July to be in line with its expectations. It said it would continue to maintain both gross margins and the operating cost reductions achieved in the second half of last year, while at the same time focusing on consolidating the performance of its distributor network.

It added that it was also currently reviewing its field management structure, as it did not believe it had achieved the right balance between recruitment activities and developing sales within its existing distributor base.

Financial Premier Direct Alison Flood

See Also