ferret's stock to watch: gazal corporation

Ferret's Stock to Watch: GAZAL CORPORATION LIMITED
08:26, Tuesday, 31 August 2004


CLOTHING MAKER'S GOOD YEAR AND 2005 LOOKS BETTER


Sydney - Monday - August 30: (RWE)
**********************************

OVERVIEW
********

Generally Ferret's a bit wary of rag trade companies because
fashion is so fickle.

But one company that popped up yesterday seems to challenge this
belief.

Gazal Corporation Ltd came up with a record after tax profit of
$10.835 million for the year to June 30, an increase of 11.5 per cent on
the previous year.

Nothing sensational you might say but a solid performer.

Dividend is not bad either with 15.5 cents for the year to
produce a yield of around 5.11 per cent.

In addition there will be a special 10c distribution to be made
on December 17.

Now that's a good reward for shareholders and impressive enough
to convince any doubting Thomas that the company is going gangbusters.

Shareholders will receive the final increased 9c final (8c
previously) much earlier on October 4.

What should also attract potential investors is the avalanche of
famous labels which pull in the younger brigade especially for the Mambo
brand which is described as pretty hot stuff.

Just read this on the Gazal web site.

"Modern Exotica is both the creative as well as the decorative
wrapper into which Mambo stuffs its sweetly marinated blend of surf & art
& music & love & life & death & football & just about the whole damned
thing".

Gazal certainly knows how describe its merchandise, all it has to
do is get the marketing sector booming.

Back to yesterday's results.

Earnings per share (EPS) increased by 10.6 per cent to 18.8c.

Earnings before interest, tax, depreciation and amortisation
(EBITDA) grew by 15.5 per cent to $22.737 million.

EBITDA margin improved to 11.8% of sales compared to 10.1% of
sales for the previous year.

The more favourable Australian dollar exchange rate during the
year contributed to an improved margin in the Australian businesses, as
well as steady control of overheads during the year.

Excluding Asian operations, sales increased by 5.7 per cent over
the previous year to $192.974 million.

Sales from Asian operations this period were nil compared to
$12.180 million for 2003, as the Asian operations were sold in June 2003.

The company's key brands including Van Heusen, Nautica, Maui &
Sons, Midford, Lovable, Oroton, Crystelle and Kookai, all produced
strong results with increased sales and earnings.

Trading for the 2005 financial year has begun strongly and the
outlook for the remainder of the year is very good.

It is expected a full year of contribution to results from the
acquisitions of the Davenport Group and Trent Nathan, and the
commencement of the Kenneth Cole business will enhance overall profits.

This together with improvement in the Mambo trading results has
enabled the company to budget for improved profitability in the 2005
financial year.

The level of increased profitability will depend on there being
no material deterioration in the Australian dollar exchange rate.

In addition it hinges on a continuation of consumer confidence
reflected in retail sales.

The company is forecasting that earnings for the year ended 30
June 2005 should be about 15 per cent above the 2004 financial year.


SHARE PRICE MOVEMENTS
********************

Shares of Gazal rose 2c to $2.84 yesterday. Rolling high for the
year has been $2.84 and low at $2.40. Dividend for the year is 15.5c
(14c) showing a yield of 5.11 per cent.

The past year has been one of the most important times for Mambo
Surf& Casual wear, not just in terms of defining its personality but also
in determining the company's commercial future.

Over the past 12 months, Mambo has taken back the company's UK
and European licences.

While this has been done for a number of reasons, our primary aim
has been to streamline our delivery and customer service and equally
important, to regain full control of all aspects of Mambo's personality
and visual development.

In September, Mambo was in London for the opening of our new
store in Carnaby Street. This brings to three the number of stores that
Mambo has opened in London over the past six months, the other two being
in Islington and Covent Garden.

While Mambo has opened several "landmark" stores during its
recent history, the Carnaby Street store is one of the most important to
date.

Mambo was again the major sponsor for both the Mambo Merimbula
Malibu Contest and the Mambo Merimbula Wave Sailing & Kite Surfing
Classic. Both contests have been significantly expanded over recent
years, particularly the Wave Sailing & Kite Surfing Classic which
attracts entries from NSW, QLD, VIC and SA.


BACKGROUND:
**********

Gazal Corporation Ltd is one of the largest publicly listed
branded apparel companies in Australia. Based in Sydney and listed on the
Australian Stock Exchange, the company specialises in developing and
building national and international brands in the apparel and fashion
accessories industry.

Gazal is a leading apparel supplier of surf and casual wear, mens
business shirts, intimate apparel and school wear sold under such brand
names as Mambo, Nautica, Maui and Sons, Oroton, Kookai, Tigerlily, Van
Heusen, Bisley, Paramount, Lovable, Crystelle, Midford and Stamina.

The Gazal Group of companies was founded by the late Joe Gazal in
Sydney in 1958 as a small company manufacturing men's shirts and pyjamas.
The business grew quickly and soon gained a reputation as a reliable,
high-volume supplier of private label clothing.

The Group was first listed as a public company in 1973, which
gave the company the capital resources required for growth through its
acquisitions and expansions.

The 1970's and 1980's saw the Group capitalise on its strengths
as a dependable, quality, volume supplier to the major national retail
chains.

When the import quota system was dismantled in the late 1980's,
Gazal restructured its supply base and rationalised its domestic
factories.

The way of the future was clearly an international one, and the
Gazal Group began to develop its network of overseas suppliers and
manufacturers.

On the marketing side, it was apparent by the early 1990's that
the 'private label' business was becoming increasingly competitive and
vulnerable.

In 1993, the Group made a key strategic move to rationalise its
'unbranded' business and make its national brands the main focus of the
Company.

Efforts and resources were concentrated on this direction and it
proved a major turning point in the evolution and growth of the Gazal
Group of companies.

From this point onwards the strength of the group has come from
developing existing brands and building new brands, mainly under licensee
arrangements.

The next phase in the evolution of the Gazal Group was to move
from being a 'brand renter' to being a 'brand owner'.

Today Gazal is directing its energies and resources towards
ownership of high-profile brands wherever the opportunity presents
itself.

This focus on 'brand ownership' offers the Group security of
tenure.

It also affords us the opportunity to invest in and develop
intellectual assets which can evolve global brands with real long-term
value.

The development of the Group-owned surf and street wear brand
"Mambo" is hard evidence of the implementation of this strategy.

This 'Australian icon' brand contributes to Gazal's position as one of the
leading branded apparel companies listed on the Australian stock
exchange: as of this year, the Group has annual sales of $193 million.

The portfolio of well-known and substantial brands - Mambo,
Nautica, Van Heusen, Lovable, Crystelle, Maui and Sons, Bisley,
Paramount, Midford, Stamina, Tigerlily, Oroton, Mariner and Kookai brands
- gives Gazal excellent diversification across its core product
categories and customer segmentation levels.

ENDS

Copyright © 2004 RWE Australian Business News. All rights reserved.

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Cheers,

Fig Jam

I don't hold GZL