Kresta lifts profit, pursues faster growth

National window coverings company Kresta Holdings Ltd is planning to accelerate its national growth and is pursuing acquisition and export opportunities following a solid recovery in earnings.

Net profit after tax rose 8.3 per cent $4.1 million in the year to June 2007, with sales up 46 per cent and profit before interest and tax up 57 per cent.

A big increase in financing costs crimped the net profit result.

A Kresta announcement is pasted below:

Kresta achieves 57% increase in earnings to $7m, sets solid foundations for future growth

Key points:
- EBIT increases by 57% to $7m
- Group revenue increases by 46% to $117m
- National expansion of Curtain Wonderland business to be fast-tracked
- Export focus to increase in next period
- Fully franked dividend of 1c to be paid in January 2008

Leading national window coverings company Kresta Holdings Limited plans to fast track the expansion of its national retail offering following confirmation of a continuing steady profitable growth.

For the year ended 30 June 2007, Kresta achieved an Earnings Before Interest and Tax (EBIT) of $7m - which represents a 57% increase on the $4.4m recorded for the previous financial year (after adjusting for the profit of $942,000 from the sale of surplus property).

Group revenue also increased by 46% to $117m. Comparable store-by-store sales increased by 10%.

The July 2006 acquisition of Curtain Wonderland for a net cost of $1.3 million (of which $842,000 was attributable to goodwill) made a significant contribution to the Group's EBIT for the period and the directors of the company have decided to fast track the rollout of more Curtain Wonderland stores across Australia in the coming 12
months.

Curtain Wonderland currently operates in Queensland and New South Wales, with the acquisition adding 19 stores to the Kresta network, which already had 56 stores operating throughout Australia and New Zealand.

Since the acquisition, Kresta has successfully integrated Curtain Wonderland into its window covering business, creating significant economies of scale and increasing the profitability of the Kresta business.

Kresta plans to add ten Curtain W onderland stores to its network in the coming 12 months, with at least four of these being in W estern Australia.

The company has already identified a number of sites and expects to finalise negotiations regarding these in the coming months.

Kresta expects the growth of Curtain Wonderland will enhance the overall EBIT of the Kresta Group within the next three years. Measures taken to sustain the profitability of the Group include :

1. Management restructuring and cost savings
Savings of $500,000 have been achieved for the 2007/08 year so far, with the company identifying and reducing its exposure to skill sets that are not required to take the company forward. Continued focus on major operational areas is expected to generate savings of another 1% on gross margin in 2007/08.

2. Export push
The development of export opportunities is coming to fruition with a signing of letter of intent with a prospective customer for Ventex venetian blind fabric in USA. This is another growth opportunity which is expected to generate significant earnings in the next 3 years.

3. Retail store expansion
Continued expansion is planned, with a rollout of additional stores for Kresta, Vista, and Curtain Wonderland.

Dividend Payment
Kresta's record of paying a fully franked dividend since 2003 is continuing and the directors have declared a fully franked dividend of 1 cent payable in January 2008.

Outlook
The directors will be looking to grow the Kresta business and will continue to focus on acquisition opportunities that will benefit the Group. Kresta has been conservative in its management approach in recent times and believes this action has provided the solid foundation the company now enjoys. It is the directors' intention to continue to grow Kresta's business so that it maintains its position as a leading window covering company with a reach throughout Australia and New Zealand.