Retailer to distribute HK$395 million as dividends despite 50pc fall in earnings
Giordano International, a casualwear retailer with more than 1,700 outlets in Asia, has proposed to pay dividends almost twice the amount of its earnings last year, despite a 50 per cent plunge in net profit.
Because of a one-off tax expense imposed by the central government, net income slumped to HK$205 million last year, compared with HK$406 million in 2005 and the HK$325.5 million estimate by a Thomson Financial poll of 19 brokers. Sales declined 0.9 per cent to HK$4.37 billion.
Earnings per share amounted to 13.8 HK cents, down from 27.5 HK cents in 2005, but the company will keep total dividends unchanged at 26.5 HK cents a share, resulting in a payout ratio of 192 per cent.
The move to dispose HK$395 million in cash as dividends can make the company less attractive as a takeover target. Giordano had HK$665 million net cash at the end of December, compared with HK$827 million a year ago.
Tokyo-listed Fast Retailing, operator of Uniqlo clothing retail outlets, planned to buy a stake in Giordano in August last year. It ended the attempt one month later, saying Giordano's share price did not reflect 'the operational state and thus the inherent value of the company' and Giordano's management had also been 'reluctant to enter into any meaningful dialogue'.
Chairman and chief executive Peter Lau Kwok-kuen said the company decided on the dividend level after taking its cash level into consideration.
