January 23, 2004

By Vera von Lieres

Cape Town - About four months after its acquisition of top-end niche furniture and lifestyle retailer Wetherlys, Ellerine Holdings is on track to roll out at least seven Wetherlys outlets in Spain by 2008.

Financial director Reg Rawlings said yesterday a key benefit of the R507.2 million deal was that it placed Ellerines, which has traditionally targeted the middle- to lower-income groups, in a different category compared with its listed competitors.

"Not only has it contributed to the diversification of risk but now we have a cash business, which means we have countercyclical cash flows - something that is positive for us."

At the time of the merger, Ellerines chief executive Peter Squires emphasised that the two furniture brands, distinctly different due to their cash (Wetherlys) and credit (Ellerines) focus, would remain separate in the new group structure.

In Europe, Wetherlys' expansion would fall on Spain, Rawlings said. The search for real estate was on, with the aim of signing leases over the next few months.

A month ago, the niched retailer, a family-run business that includes the up-market Osiers cane and linen chain, bought out the remaining 50 percent of shares in a Spanish operation it had been in partnership with for about 18 months, now called Wetherlys Spain. This would form the base of the European expansion. 

"Spain is a good market because a lot of products are exported to England and Portugal. Add to that many wealthy retired people who live there, complemented by a relatively stable economy," said Rawlings.

He conceded that Wetherlys' R90 million contribution to Ellerines' group turnover in the four months to December was "not where we'd like it to be" but pointed out that the smaller group did not have its eye as firmly on the ball, due to the merger.

"Into the future, the contribution to group bottom line should be around 20 percent."

In a trading update on Wednesday, Ellerines reported record sales of R1.2 billion for the four-month period.

The merger formed part of large-scale consolidation in the furniture industry over the last year, which included JD's acquisition of troubled Profurn while about 200 smaller furniture retailers closed shop.

Not far off its year high of R33.35 achieved last week, Ellerine Holdings stock added R1.75 to R32.35.

The group will report half-year results in May.