Brazin comes up trumps

Operating profit prospectus forecasts were exceeded by 3.2%, giving credence to Gerry Harvey's view that at least in certain sectors, retail sales are pretty strong. Starting on September 3, an on-market share buy back of up to 4% of issued capital will be undertaken, offering good share price support. The Directors have recommended paying a fully franked 10 cent final dividend, an impressive 33.3% above the forecast. Net profit after tax and before abnormal items of $19.2m was $600,000 above the prospectus forecast - again an impressive result.

Organic growth

As the company listed during the year under review, on year figures don't mean that much. However, like-for-like store sales did increase by 6.5% on the previous year and this gives us some comfort. It means that growth isn't just a function of more stores, but increasing sales per store too.

For competitive reasons the company doesn't provide a breakdown of sales or profitability by division. Despite our tendency to view most company figures with a healthy degree of suspicion, it's clear that Sanity Music was the earnings growth driver. Underpinned by 64 store openings during the year, much of this growth was achieved through acquisition. All in all, it's a very positive result although the more astute investor knows that a day of sunshine does not a summer make. So, is the growth sustainable?

All the Brashs and Blockbuster Music Stores have been renamed and Sanity management systems installed. Store numbers now total 154 and management remains confident of reaching its target of around 250 music stores. The new parallel import legislation will have a positive impact on Sanity Music, allowing product to be purchased from more than one supplier. Retailers will be the biggest beneficiaries of this new law via a combination of increased sales driven by lower prices and higher margins from not passing the full benefit on to the consumer.

Share price holds up well

Bras N Things continues to hold a dominant position in the Australian lingerie market although store numbers increased by just one during the year to 111 - this is a mature segment of the market afterall. Aztec Rose continues to maintain its dominant position in the women's surfwear market and will soon move to larger premises to assist further expansion.

Since listing the company has more than met our expectations and while we'd love to know the sales and earnings breakdown between the divisions, we're more than comfortable with the company's prospects. Since our last review on July 31 (Accumulate - $2.40), the share price has held up well during a volatile period. Continue to ACCUMULATE, particularly on weakness.