Growth strategy hurts Avoca profits

Expansion costs at family- owned retailer Avoca last year contributed to pre-tax profits declining at the group by 28% to €1.197m.

New figures show that Avoca Handweavers Ltd and subsidiaries sustained the drop in pre-tax profits in spite of revenues increasing 2.2% from €48.6m to €49.7m in the 12 months to the end of Jan 31 last year.

The company designs and manufactures its own clothing, food and home furnishings from its Co Wicklow base and it has 10 retail stores and cafes in Ireland.

In an interview, managing director Simon Pratt said yesterday: “We were disappointed with the performance to Jan 2012 but it was a year when we put into place some new structures to allow for future growth.

“One of the factors in the reduced profits for 2011 was investing in areas of expansion that are already paying dividends in 2012,” he said.

“In the past two years we have opened a standalone central bakery, launched a new food-only model at Monkstown and opened a 20,000 sq ft store in Malahide, creating 170 new jobs in the process,” he said.

Mr Pratt said that Avoca had its busiest Christmas retail business since 2007 with like-for-like sales on 2011 up 5%. He said: “There appears finally to be more positive sentiment.”

Mr Pratt confirmed that counting new business the year-to-date turnover is up over 15% for the retail and café business.

“The current (financial) year is proving more positive in terms of both sales and profit increase.

“We have expandedour retail operations, with the first full year trading of our Salt Café and Avoca Food Market in Monkstown and the opening of Malahide Castle, and consolidated our wholesale business,” he said.

On the 2011 performance, Mr Pratt said: “Our retail business was consistent with the previous year while we faced challenges in our European export markets in our wholesale division.

“We have since restructured our wholesale operations and this is now showing improvements in 2012,” he said.

Avoca now employs 750 people and Mr Pratt said: “Where a number of retail models have not been able to survive we are thankful to be able to weather the storm.

He said: “I believe sustainable job creation is now one of the biggest obligations that falls on entrepreneurs in this country in the current climate.

“At Avoca we are fortunate enough to have a reasonably successful company and it is our duty to create what jobs we can.”

No dividend was paid last year.

The accounts show that the group had €15.7m in accumulated profits at the end of January last.

Its shareholder funds stood at €23.6m. The group had bank loans totalling €16.4m.