Coles Group takeover

Wesfarmers has won board support for its record A$18.2 billion ($21.6 billion) cash and stock bid for Coles Group, Australia's second-biggest retailer, after promising to top-up the offer if its share price doesn't rebound.

The takeover was in danger of failing after Wesfarmers' stock plunged as much as 19 per cent from a record A$45.73 the day the deal was announced, wiping A$2.5 billion from the value of the offer. Wesfarmers yesterday pledged to give Coles investors more stock if its shares are trading at less than A$45 in four years' time.

Wesfarmers shares, which accounts for three-quarters of the value of the bid, have slumped on concern the Perth-based company is paying too much for Coles, whose profit growth has stalled. Rather than increase the offer now, Wesfarmers' chief executive officer Richard Goyder is betting he can revive Coles' fortunes and boost his share price. "This modification of our offer reflects our confidence in the value of the transaction to shareholders of both companies," Goyder said yesterday.

Coles shares rose A68c, or 4.8 per cent, to A$14.92 by early afternoon in Sydney. Wesfarmers shares rose A$1.17, or 3 per cent, to A$39.71. Coles shareholders will get A$4 cash, a 25c dividend and the rest in shares. Half the share component will be ordinary Wesfarmers stock, and half will be so-called price-protected stock. The price-protected shares, which will trade on the Australian Stock Exchange, will pay an annual dividend of at least A$2 each. If Wesfarmers shares are trading below A$45 in four years, owners will get free stock to make up the difference.

The sweetened bid is in the best interests of shareholders, Melbourne-based Coles said, citing a report by Grant Samuel & Associates. Coles did not release the Grant Samuel report, which was commissioned to assess if the bid was "fair and reasonable". The offer from Wesfarmers, whose businesses include mining and insurance, was valued at A$17.25 a share when it was announced July 2, based on the company's record stock price at the time.

The deal was worth A$15.22 a share at Tuesday's prices, which is below a A$15.25 cash offer Coles rejected in October as too low and "substantially" undervaluing the company. Coles owns 3000 stores including supermarkets, Officeworks stationery supply outlets, filling stations and the Target and Kmart discount department stores. Coles shares haven't traded at or above A$17.25 since the bid was made. Wesfarmers was the only bidder for Coles after buyout firms TPG and Kohlberg Kravis Roberts & Co. dropped out of an auction.

Goyder made the bid alone after his buyout partners, Permira Holdings and Pacific Equity Partners, withdrew just before the deadline for bids because of rising borrowing costs. Coles rejected a A$15.25-a-share cash offer from KKR in October as too low, instead backing CEO John Fletcher's promise to boost earnings 35 per cent. In February, the company put itself up for sale after giving up on Fletcher's forecast.

Deutsche Bank and Melbourne-based Lazard Carnegie Wylie are advising Coles. Wesfarmers is being advised by Gresham Partners and Macquarie Bank.

Australia's second-largest retailer, Coles Group, agreed to a A$22 billion ($NZ24.5 billion) bid, including debt, from conglomerate Wesfarmers, in the country's biggest takeover.  The deal, if approved by shareholders, will end a protracted auction process since Coles first put itself up for sale in February after poor performance. Last year, it rejected two offers from private equity firm Kohlberg Kravis Roberts.

Wesfarmers, which owns Australia's largest hardware chain, Bunnings, will pay A$4 in cash and 0.2843 Wesfarmers shares for each Coles share, which it said valued each Coles share at A$17.25.  That represents a premium of 7 per cent to Friday's closing price for Coles.

"I'm surprised that Coles is able to extract A$17.25 given that it appeared that Wesfarmers were the only people at the table bidding for the assets," said Richard Herring, director at Burrell & Co. "Let's hope that Wesfarmers hasn't underestimated the task ahead of them," he said.

Wesfarmers, which snared 12.8 per cent of Coles in a share raid in April, said it expected to complete the deal in October.  Managing director of the Perth-based conglomerate, Richard Goyder, told a media briefing it planned to hold on to all the Coles units.

Wesfarmers had to bid solo for the troubled supermarket chain, after its private equity partners, Permira and Pacific Equity Partners(PEP) withdrew over the weekend.  The private equity firms were unable to make a deal stack up after a sudden jump in the cost of credit in US markets over the past week, a source familiar with the situation said.  Wesfarmers was left as the only bidder for the entire Coles group after a rival private equity bidding group led by TPG pulled out of the running last Thursday, also citing the rising cost of credit in the US.

Coles and Wesfarmers shares are suspended from trading and expected to resume today.  Wesfarmers was aided in its cash and scrip offer by the 21.4 per cent surge in its share price since late May, as its prospects for winning Coles kept improving. Wesfarmers shares closed on Friday at A$45.73, a record high.

The Wesfarmers' offer values Coles at 23 times forecast 2008 earnings, higher than its more successful competitor Woolworths at 21.3 times and UK's Tesco Plc at 17 times.  Coles said the offer has no conditions attached related to financing or competition regulator clearance.  It noted the takeover price was a 19 per cent premium over its price on February 22, before the sale process was announced.

Wesfarmers had originally planned to take a 50:50 stake in Coles' core supermarkets business with its private equity partners, and own 100 per cent of the general merchandise units, but is now bidding for the entire group on its own.  After rising to a record A$17.89 in May, Coles shares dived as members of the private equity consortium pulled out, and on Friday closed at A$16.12.

Coles has 2900 supermarkets, liquor stores, K-mart and Target stores, and office supplies stores Officeworks.

A source close to the situation said earlier today that PEP was still in talks with Wesfarmers about a management role, which is seen as critical by analysts to help turn around Coles' troubled core supermarkets business.  Steven Cain, a former executive at Coles and UK supermarket chain Asda, is a director at PEP and has been touted as having the experience necessary to help Coles catch up with larger rival Woolworths Ltd.

Without equity partners, however, Wesfarmers is likely to take on a larger amount of debt and may make a rights issue to fund the takeover, which will double the size of the company.  "It's a very big bite for Wesfarmers without its partners, no doubt about it. But if they can retain (retail executives) Steven Cain and Archie Norman to turn it around, it should all work out," said an analyst at an investment bank.  Norman, a Briton, is a former head of Asda, and has a consulting role with the Wesfarmers consortium.

The joint announcement appears to leave no room for rival Woolworths, which lodged its own bid for some of Coles' units at the weekend.

Coles had set a Saturday deadline for bids, four months after putting itself up for sale in February because of poor performance in its core food and liquor business.  Coles is being advised by Deutsche Bank and Carnegie Wylie, while Wesfarmers is being advised by Gresham Partners and Macquarie Bank.

Private equity firm Bain has pulled out of the consortium looking at buying Australia's Coles Group, a source familiar with the matter said.

Coles' advisers have been told Bain was withdrawing, the source said. The source said there was no official word about the position of Blackstone Group, which is also reported to be considering withdrawing from the group.

The size of the group had shrunk to four after Kohlberg Kravis Roberts and CVC pulled out earlier this week, boosting the chances of a rival bid by conglomerate Wesfarmers.

The remaining partners in the private equity consortium are Texas Pacific Group (TPG) and Carlyle Group.

MELBOURNE - Coles Group, Australia's second-largest supermarket retailer, yesterday set a June 25 date for final bidding for the company as it reported a tiny 0.6 per cent rise in third-quarter sales.

Coles, which put itself up for sale in February, also said conglomerate Wesfarmers would start checking its books starting May 25. That is the day the two-week exclusive period of due diligence of a private-equity consortium led by Kohlberg Kravis Roberts expires.

Wesfarmers last month offered A$19.7 billion ($22.2 billion) for the retailer. A potential third bidder, Britain's Tesco, decided last week not to pursue an offer.

Coles reported sales from continuing operations in the 13 weeks to April 29 rose to A$8.4 billion. By comparison, main rival Woolworths reported an 8.8 per cent increase in the quarter to A$10.56 billion.

"It's a pretty dire retail result," said ABN Amro Asset Management analyst Matthew Hoult.  "With inflation running at 3 per cent, the implication is that volume comparisons are seriously negative, which in a retail environment is the last thing you want to see happening," he said.

ABN Amro analysts had forecast like-for-like sales growth of 2.1 per cent, while JPMorgan had forecast a 2.2 per cent decline.  Coles said comparable sales in its core food and liquor business rose 0.8 per cent, which it said was in line with its expectations.

The retailer said cost-saving initiatives and moves to improve the fresh food offering were having a positive impact, but were introduced too late in the quarter to be reflected in the result. Coles has struggled since the failed conversion of its discount Bi-Lo supermarkets to the Coles brand.

It left its forecast of steady net profit for the year unchanged.

British retailer Tesco has decided not to pursue a bid for Australian retailer Coles Group, a source said yesterday.

"They viewed it as a massive turnaround being required and a huge resource commitment," the source said, referring to Coles, which has a market capitalisation of A$21 billion ($24 billion) and has been losing market share to rival Woolworths.

The withdrawal of interest from Britain’s biggest supermarket group leaves conglomerate Wesfarmers and a consortium including private equity giant Kohlberg Kravis Roberts to battle it out for Coles.

Tesco appointed Merrill Lynch to look into a possible Coles offer, sources confirmed last week, but had decided in recent days it was not a sound move.  Sources have also pointed out Tesco usually does not buy its way into a mature market but prefers to set up on its own in emerging markets.

The Australian Financial Review reported yesterday that Tesco’s interest was believed to be waning but negotiations between Wesfarmers and Coles were in the final stages for a start to due diligence.

Wesfarmers emerged as a surprise contender for Coles last month, offering A$19.7 billion for the retailer.  Other local newspaper reports said KKR was close to finalising a joint venture with Woolworths to bid for Coles.

Coles put itself up for sale in February after rejecting an A$18 billion private equity bid last year.

The two listed companies which upgraded their earnings outlook last week both received takeover offers this week.

Dental software group Software of Excellence upgraded its earnings outlook last Thursday, lifting its net profit forecast to $4.3 million from $3.85 million. On Monday trading was halted while news of a conditional bid by an unnamed buyer was released.

Also last Thursday Tourism Holdings increased its after-tax trading profit forecasts to between $17.5 million and $18.5 million - up from the previous predictions of $15 million to $18 million. Then on Monday it announced a takeover bid from ASX listed MFS Living and Leisure at $2.80 a share.

Interesting timing.

Still if someone was coming round to make an offer on your car, you'd want to give it a bit of a polish wouldn't you.

Tourism Holdings shares closed at $2.73 yesterday. Software of Excellence closed at $2.72.

Woolworths lynched
As reported in Stock Takes last week, Merrill Lynch - which has been linked to UK retailer Tesco - has been in town assessing the local grocery scene.

Merrill Lynch’s Sydney-based research team has produced a report which comes to some bold conclusions about the New Zealand market.

The report is highly flattering of the Foodstuffs co-operative. Merrill Lynch analysts have rated it the best example of a co-operative business they’ve seen (sorry Fonterra). They also say Foodstuffs is providing Woolworths (which owns the rival Progressive chain) with the toughest competition it has faced in any business. Wow.

Citing examples of the speed with which Foodstuffs has responded to match or better proactive pricing moves by Progressive, the report concludes that Woolworths could not win a price war with Foodstuffs.

And despite Woolworths' best efforts, Foodstuffs continues to gain market share, it says. Foodstuffs is dangerous because it has a unique, "patriotic, highly efficient and almost family-like" ideology which is difficult for Woolworths and its equity analysts to fully understand, the report concludes.

Apart from the faintly patronising tone (Foodstuffs comes off as some sort of hardy barbarian tribe that will never bow to the Roman Empire) it's glowing stuff.

The report portrays the co-operative's position as so strong that it is probably the last thing Foodstuffs management needs the Commerce Commission to be reading right now as it fights for the right to buy The Warehouse.

There are still growth prospects for Woolworths in New Zealand - but only if it stops trying to beat Foodstuffs on price, the report says.

The analysts also make the case for Woolworths being a likely buyer of The Warehouse - but we already knew that.

So, where does all this leave us on the The Warehouse sale prospects?

The Australian newspaper has reported that Tesco is now a serious contender for at least parts of the Coles empire. There’s been no denials and if correct it seems reasonable to assume that Tesco would also look seriously at The Warehouse.

In relative terms it's not a huge purchase ($22 billion plus for Coles vs $2 billion or so for The Warehouse). And the distribution synergies would make a double buy compelling.

Tesco has also been linked to Woolworths with the assumption that Woolworths might buy the general merchandise parts of Coles (which wouldn’t attract the ire of competition regulators) and Tesco would take the grocery.

Of course, a research report by the Merrill Lynch broking team doesn't equal proof of interest from the Merrill Lynch investment banking team.

But what it does mean is that the local market is now exciting enough to warrant a rare foray across the Tasman by Australian analysts.

The Warehouse shares closed down 1c at $6.95 yesterday.

Airport stocks defy dollar's drag
A look at the top-performing stocks for the year so far shows Air New Zealand still leading the pack with returns of 61 per cent. Tourism Holdings is now second after the takeover offer this week - up 41 per cent. Michael Hill continues its strong run up 39 per cent.

But most interesting is the strong performance of Auckland International Airport, which hit a record high of $2.63 yesterday (it closed at $2.61) despite the fact that the high dollar is largely a negative for the company as it is likely to dampen foreign visitor numbers. The stock has delivered returns of 22 per cent for the year to date.

Goldman Sachs and Macquarie are understood to have been big buyers in the past few days.

A possible reason for the surge in buying is a belief that the airport may be about to spin off some property assets in a listed trust to take advantage of the portfolio investment entity (PIE) tax changes kicking in on October 1.

Conventional wisdom would suggest three key factors holding sway over AIA shares. The dollar, which has moved unfavourably in the past six weeks, is a negative.

That is offset slightly by the strong growth of AIA's biggest customer, Air New Zealand, which is increasing passenger numbers with the addition of new routes such as Vancouver and Shanghai.

The airport's new price regime - due to be in place later this year - is another positive. It is almost certainly going to mean an increase in revenue although how much of a jump is still to be determined. There are those who believe the airport cannot afford to push prices up too much or it risks copping a new regulatory regime from the Government.

Another positive factor is the market enthusiasm for infrastructure stocks, considered a safe bet by those who fear the long bull run may be drawing to an end.

But none of these explains the recent sharp surge.

An independently listed property subsidiary makes a lot of sense. Property management provides a sizeable revenue stream for the airport and the tax changes will be lucrative for listed property trusts.

Stocks such as Kiwi Income and and AMP Property Trust have already risen this year as the positive benefits of the change have been factored in.

Listed property entities will get a tax-favourable status as portfolio investment entities. Taxpayers now have to pay additional tax on dividends from property trusts.

But under the proposed changes, the investors’ tax rate will be capped and could be the same as the property entity’s tax rate. Most entities have tax credits and pay well under 33 per cent tax.

Tourism takeover
Valuations of Tourism Holdings were all over the show prior to the $2.80 per share takeover offer from MFS Living and Leisure this week. But they had one thing in common - no one thought it was worth $2.80.

Just last week Goldman Sachs JBWere had the value as low as $1.90 but following the profit upgrade yesterday it revised its view to $2.10.

Forsyth Barr’s Rob Mercer was most optimistic with a pre-offer valuation of $2.58 (he has raised that to $3.17 this week).

ABN Amro's David Oxley had it at $2.09 prior to the bid but has now upped that to $2.80.

UBS and First NZ have also both raised their valuations to $2.80 in the wake of the bid.

The success of the takeover ultimately hinges on the response of US private equity consortium Sterling, Drake and Associates. They hold a 20 per cent stake which they have been steadily building for the past 12 months. Buying by the consortium prompted Stock Takes to speculate on the prospect of a THL takeover last year.

Presumably the US grouping had identified THL as an undervalued company but whether they were planning a bid of their own or whether they were just counting on an offer like this one emerging remains to be seen. Investors clearly don't rate the chances of a rival bid emerging. THL shares closed up 2c at $2.73 yesterday.

Dollar downgrades
Goldman Sachs JBWere has made some more currency related downgrades to two more export stocks. Pumpkin Patch and Cavalier Corporation both get their 2008 earnings forecasts dropped by about 4 per cent in a note by analyst Rodney Deacon.

Revising his forecasts to reflect Goldman's latest currency projections, Deacon drops the 2008 Pumpkin Patch profit forecast to $38.3 million. He also drops the 2009 profit forecast by 2 per cent to $46.8 million.

His valuation drops slightly to $3.91. That's because his model runs forecasts all the way out to 2020 and the currency revisions impact only on the next three years.

However, Deacon also retains a long-term "buy" recommendation on the stock and it closed up 13c at $4.48 yesterday.

Any short-term weakness should be seized as a long-term buying opportunity, he writes.

Cavalier has its net profit forecast for 2008 lowered 4.5 per cent to $215.9 million and 2009 dropped by 1.9 per cent to $16.9 million. As well as the dollar, Cavalier still faces challenges from weakness in the New Zealand market, he writes.  Deacon values the stock at $3.08 and rates it as a "hold" long term.  Cavalier shares closed up 12c at $3.20 yesterday.

MELBOURNE - Australia's Woolworths is in talks with a number of potential partners about a bid for Coles Group, a source said, amid reports it was leaning towards UK retailer Tesco rather than a KKR-led consortium.

The Australian newspaper reported yesterday that Woolworths was talking to Britain's largest retailer Tesco as part of its ambitions to secure parts of the Coles group, which has put itself up for sale.

The source declined to rule out Tesco as one of the interested parties, which has been the subject of media speculation. "Discussions are progressing with a number of parties" about potentially linking up for a bid for Coles, the source said.

Woolworths did not have a favourite potential partner as yet but saw itself as key to enhancing another bid for Coles, the source said.

Any Woolworths bid would compete with a A$19.7 billion ($22 billion) takeover offer from conglomerate Wesfarmers and create a third bidding force in addition to the KKR group, which may still bid without partnering a listed company.

"Things are still very much alive for KKR," a second source said yesterday when asked about a KKR bid for Coles.

The KKR consortium was still talking to Woolworths but was also exploring the option of making a higher cash bid or setting up a listed vehicle which would give Coles shareholders a scrip option, the source said.

Woolworths chief executive Michael Luscombe said last week the retailer was having talks with "a variety" of parties, but at present was planning to examine Coles' books by itself.

Woolworths is interested in acquiring the Officeworks business supplies chain and discount clothing retailer Target, but it would be prevented from acquiring Coles' core supermarkets and liquor business because of competition concerns.

There has been speculation that Woolworths could team up with the KKR consortium of six private equity firms to bid for Coles. The KKR consortium, which includes Bain, CVC, Blackstone, Carlyle and TPG, has not made a firm bid but said it expected to match or top the Wesfarmers offer.

Analysts have said Wesfarmers has an advantage with shareholders since the scrip portion of its bid offers capital gains tax relief, which a cash-only bid cannot match.

A foreign retailer such as Tesco, or a private equity group such as KKR, can only offer cash unless it teams up with a listed Australian company that can offer its shares as part of a bid.

STILL KICKING ...
The tyres, that is. At least that is what we are being told about the long-running sale of Restaurant Brands.

The company promised a definitive call on sale prospects by the end of the month and, despite delivering its full audited result yesterday, chairman Ted van Arkel maintains he won't talk about the sale process until April 30.  It could be that final talks are going down to the wire, although there are few in the market who view the situation with that much optimism.

The last potential buyer - likely to be CVC Asia Pacific - must surely be tempted to drop out and come back for another go on its own terms when a few issues have been resolved.  The share price has already sagged to pre-takeover talk levels and may sink further if the sale process is declared a failure. That would make the prospects for a hostile bid pretty good.

It is also likely that prospective buyers would rather wait and see if the turnaround at KFC can be maintained, and if there is any hope of a similar revival for Pizza Hut, before they make a commitment. If the company can continue to make some operational progress then revived sale prospects might not be so bad in the long run.  Restaurant Brands shares closed at 92c yesterday.

ENDANGERED SPECIES
A small announcement from the NZX this week could mean big changes to the way shareholders get the lowdown on a company's progress.  Basically, the NZX is bringing its regulations in to line with changes to the Companies Act so that - in theory at least - big glossy annual reports could be a thing of the past.

One reader was quick to point out all publicly listed companies should be encouraging shareholders to opt for electronic reports - from an environmental and financial perspective.  But companies also needed to ensure that the electronic reports are user friendly: "Simply reproducing a multi-column report for reading on a computer monitor is a sign of laziness." Which is a fair point, although there are also plenty of shareholders out there who still like to get the full report in the mail.

The economic practicality of printing reports for all shareholders will vary from company to company.

But, as the NZX's Elaine Campbell points out, shareholders will have the right to tell companies what they want. Making that clear in no uncertain terms is the key to making this change work.

AIR NZ EFFECT
It's great to see a soaring local stock impacting on valuations in Australia. It's usually the reverse of course, with anything the Rinker takeover deal to the Coles furore prompting New Zealand investors to reassess relevant values on this side of the Tasman.

But Australian commentators seem to have noticed that Air NZ's stellar run is making the Macquarie-led consortium's bid for Qantas look a bit ordinary.

The Sydney Morning Herald this week noted that Qantas shares had risen 28 per cent since rumours of the private equity bid began to circulate last November.  But Air NZ shares have doubled in the same period, the paper notes.  Ironically, it was the takeover bid for Qantas that was originally tipped one of the reasons for the resurrection in Air NZ's market value.

But a strong operational performance combined with some relief on the fuel price front seem to have left that theory back on the tarmac. In fact Air NZ has now risen 158 per cent since it bottomed out at $1.08 last August. Shares closed up 12c at $2.79 yesterday.

AIRPORT WARS
Meanwhile, still on an aeronautical theme, Infratil - owner of Wellington Airport and enthusiastic "would-be" developer of Whenuapai Airport in Auckland's north west - is more than a little miffed at the news that Auckland International Airport (AIA) has been funding local opposition to the development.

Infratil director Tim Brown has found a story in community newspaper the North Shore Times which says AIA has provided Whenuapai Action Group with $19,000 to fight plans for the airport.

Infratil has long expressed interest in developing the old airforce base at Whenuapai as a second commercial airport for the region.

Brown says he now intends to check the legality of the funding relationship. "It is hard to see how it would be in the spirit of the Commerce Act to be funding a vociferous group opposed to the establishment of a competitor," he says.

"At least the AIA team are not the Brethrens, so are probably not praying for divine intervention on their side."

GPG PURCHASE
Guiness Peat Group has built a war chest of more than $700 million which it is likely to spend on a new acquisition, concludes Goldman Sachs JBWere analyst Rodney Deacon in his latest report on the listed investment company. Deacon has taken another look at the group in the light of last week's sale of the Australian Wealth Management (AWM) business - which has delivered the investment company a cool A$267 million.

The timing of the AWM sale was in itself a little surprising, Deacon noted. He bases his view on the belief that the Australian wealth management industry is generally considered to be in a growth phase with potential for further consolidation. AWM was also still in the process of integrating the Select Funds business and the corporate superannuation business it had acquired from Zurich Financial and Genesys. "We think it is questionable whether the full benefit of these transactions has been fully factored into the share price," Deacon writes.

And no reason for the sale was provided by GPG management. The only logical reason for sale is a belief on GPG's part that Australian equities are near a peak.

The question now is what will GPG do with the proceeds - which take the amount of cash on the balance sheet to more than $700 million by Deacon's calculation. The Coates business is now largely self-funding and none of its other businesses need the capital. That makes a fresh acquisition the most likely option.

GPG shares closed up 1c at $2.33 yesterday.

TESCO IN THE WAREHOUSE RACE ...
The race for The Warehouse (due to get the starter's gun today, Commerce Commission willing) looks set to get more crowded.

Well-placed market sources say investment bank Merrill Lynch has hit town, hired by British grocery giant Tesco to scope out the Red Shed auction.

Tesco has long been tipped as potential buyer, with rumours dating back to a supposed meeting during Stephen Tindall's UK visit last year.

But just how Tesco might fit into a potential bidding war remains unclear.

Also this week, sources in the Australian media linked Tesco to a Woolworths bid for Coles, so it looks increasingly like there is some big-picture stuff going on behind the scenes. Tesco management has been highly public about its aggressive international expansion plans in the past year. Foodstuffs and Woolworths have been in the starting blocks for months.

Today is the Commerce Commerce's third deadline for ruling on who is allowed to buy. But considering what's at stake it would be thoroughly unsurprising if the runners are once again left waiting for another month.

Meanwhile, in the calm before the storm ... trading in The Warehouse shares has slowed to a near standstill. The share price has drifted sideways from a $7.11 close last Friday to yesterday's close of $7.10.

OLD DOG DOES NEW TRICKS
Stalwart Wellington retailer Kirkcaldie & Stains sometimes looks like a bit of a throwback on the NZX.

It all seems a bit Are You Being Served? in these days of global retail conglomerates. But Kirks is obviously doing something right because its shares hit a three-year high this week. On Tuesday the company reported its half-year profit had more than doubled to $747,000, allowing it to resume paying dividends.

Strong Christmas and summer trading, including the end of season sale, boosted sales by 11.5 per cent to $22 million, the company said.

The store has expanded from its traditional Lambton Quay home and now has a cuisine store in Wellington's Harbour City Shopping Centre.

It's also worth noting that the canny Sir Selwyn Cushing and his family investment company H&G took a five per cent stake last year.  And a group of Wellington property investors trading under the name LQ Investments has held a 19.9 per cent stake since March last year.

So it could be that new strategic stakeholders have provided management with some fresh motivation.  The shares closed up 10c yesterday at $3.10.