EXCLUSIVE: McPherson Look To Sell Home Appliances After 60% Slump In Sales
Sydney based distributor McPherson is looking to sell their struggling Home Appliance business which has witnessed a nosedive in sales following the closure of the Woolworths owned Masters.
The Company that is currently facing a further slump in sales following brutal competition from the likes of Electrolux and other house brands distributors is now up for sale.
ChannelNews understands that an expression of interest document has been issued to several interested parties including a Harvey Norman linked entity and two overseas distributors that operate in Australia.
Both McPhersons and Home Appliance management have not returned our calls.
Back in 2013 McPhersons issued an equity raising document following their acquisition of Home Appliances in which they hold an 82% shareholding.
At the time, they were seeking to raise $24 million to fund the acquisition of a majority stake in the business that lists brands such as Euromaid, IAG, Elica, and Fagor as being key to the business.
Last year Harvey Norman deranged Euromaid laundry products and a visit to the Harvey Norman website reveals some of the problems that the Home Appliances group has faced with Chef undercutting Euromaid in the oven market.
Insiders have said that Home Appliances who have witnessed a round robin of CEO’s since the business was acquired could struggle to find a buyer ahead of the launch of Amazon.
Back in May 2016 Stephen Rorie the then CEO of Home Appliance told ChannelNews in a taped interview said that the Company had revenues of $100 and was growing at 20% per annum.
In February 2017, McPhersons told the market that sales at Home Appliances had been hit by the closure of Masters and a delay in key building projects that had affected their commercial sales.
McPhersons said that their Home Appliances division contributed 22% of group revenue which in February was $149M a fall of 11% over the prior year.
On this basis sales at Home Appliances have fallen from the $100M that Rorie claimed in May 2016, to less than $32M this year said observers.
McPhersons said that the reduction in forecast full year EBIT has led to a reassessment of the carrying value of intangible assets in the Home Appliances division, resulting in non-cash impairments of $7.0m and $5.0m in goodwill and brand names respectively.
Continued range rationalisation has led to the carrying value of the Revit nail brand and goodwill recorded in the Group’s New Zealand operation being subject to non-cash impairments of $6.0m and $1.8m respectively. Management has well advanced plans to improve the profitability of these assets.
ChannelNews understand that certain retailers have pushed back on the ranging of Home Appliance products and that sales that have already fallen by over 50% are facing
Rory said at the time that the unlock key to their growth was the Company’s ability to price protect products by delivering unique products for individual retailers.
The Baumatic Compact Multifunction Oven sold at JB Hi Fi is from the same Spanish manufacture as the one sold at The Good Guys, the big difference however, is that the facia and the model numbers are different.
According to insiders one of the Companies that has hurt Home Appliance sales has been Electrolux who have successfully repositioned brands to compete head on with offerings from Home Appliances.
Insiders have told ChannelNews that a restructuring of management at Electrolux and the appointment of Michael Doyle as Sales Director saw the European Company move quickly to improve sales of their Chef brand. This coupled with a flight back to known brands who invest in marketing, has hurt HA who are not known for their marketing activities.
Currently Harvey Norman who has the top end Euromaid Black + White has moved to recommending other brands over the Euromaid offering.
Rorie told ChannelNews “We are an appliance Company who likes to fly under the radar, we are catering for several sections of the market via different retailers by deliver unique products”.
At the time of their Equity raising McPherson whose shares have slumped to $1.17 from a high of $1.43 in March 2017 said that 73% of HA’s revenue was generated by 3 cooking categories, free standing ovens, 38%, Built in Ovens, 19% and Cooktops 16% and that cooking appliances generated 81% of revenue.