Furniture retailers found themselves in all sorts of trouble last year, as consumers avoided taking on more debt and the companies struggled with their own debt burdens. The two prime examples here were Profurn and Relyant.
After a disastrous flirtation with consumer debt, Profurn was absorbed by JD Group while Relyant managed to stay afloat with a big capital injection and new owners.
Relyant lost R633m for the year ended June 2002 and had gearing in excess of 100%. The group embarked on a R792m emergency rights issue, underwritten by German retail group Poco. The Relyant board now includes Poco's Peter Pohlmann and James Moore as well as the evergreen Theunie Lategan and Martin Leigh, both of FNB.
The recapitalisation was not without its detractors, notably from the minorities, who felt they were being further marginalised without being informed, though management hotly disputed this.
Relyant now concentrates much more on retailing and less on its income from financial services. The group is showing signs of settling down, if interim results to December 2002 are anything to go by.
Ambient trading conditions remained poor and this, combined with stricter credit-granting procedures, resulted in a 12,5% drop in credit sales. Cash sales rose 10%. Profitability improved, the result of reducing overheads and decreasing net financing costs. Gearing was down significantly, but is still at 50%.
The outlook remains uninspiring but the stronger balance sheet at least gives some hope. CEO Chris Wells stepped down at the time of the publication of the interim results "to seek fresh challenges".
Profurn's demise was larger and more visible, but perhaps less surprising. For years, observers had been predicting Profurn's failure but the mercurial CEO of the time, Gavin Walker, always managed to sidestep suggestions that the group was in trouble. Walker's resignation in March last year, not long after a restatement of the group's results, came as little surprise to the market.
Profurn made its investors a lot of money in the late 1990s but they ended up giving it all back again, as the accompanying graph illustrates only too well.
JD Group finally got the green light to take over Profurn in December 2002. JD had been prevented from taking over Ellerines two years earlier and nobody was taking bets on the outcome of the competition tribunal's decision. It seems the swing factor in letting the merger go ahead was the need to preserve employment in the furniture industry generally.
The industry is now looking healthier than it has in a while, but it may take a couple of years yet for the effects of the profound consolidation to be felt fully.
It's a sector that has had more than its fair share of cavalier operators, like Rusfurn in the 1980s and Profurn more recently.
