Supergroup pledges first dividend in 2016 as part of strategy update

LONDON (ShareCast) - Supergroup (LSE: SGP.L - news) chief executive Euan Sutherland has unveiled his new strategy for the company, including the introduction of a dividend in 2016 and the repurchase of its North American rights. The FTSE 250 company, which is best known for its Japan-inspired Superdry brand, also has made a heavyweight board appointment and announced a new clothing range designed with actor Idris Elba.

A first interim dividend will be paid next year as part of a new progressive dividend policy at a prudent cover ranging between 3.0 and 3.5 times earnings. If excess cash still sits on the balance sheet over an "extended period" then management may then consider one-off special cash returns.

Sutherland, who has axed half the executives on the board since he took charge in October, said the new strategy was to enable the company to deliver sustainable growth and create a global lifestyle brand.

As a key step on this strategic journey Superdry, which confirmed profit for the full year was still expected to be in the range of £60m-£65m, has bought back the exclusive rights to distribute Superdry products in the US, Canada and Mexico for a total of £22.3m.

With one-off transaction costs of circa £0.7m and other non-underlying costs expected to reach £9m this year and £8m in the 2016 financial year, the lossmaking business is expected to dilute earnings in the 2016 financial year.

The North American business made an operating loss of £5.1m in calendar 2014 but Sutherland expects to halve the operating loss in 2016 and expects the operation to be profitable from 2017.

After re-acquiring its Scandinavian, Spanish and German partners over the last 18 months, the Cheltenham, Gloucestershire-based company terminated the 30-year licence it had granted to US licence partner SDUSA in 2008.

The purchase also includes certain assets from the lossmaking US business, including 15 shop leases, stock, and fixtures and fittings all valued together roughly £11m.

Non-executive appointment and Elba collaboration After much board upheaval in his four months in charge, Sutherland also welcomed a highly respected new non-executive director in the shape of Penny Hughes, ex of Coca-Cola and currently on the board at supermarket Morrison's and The Royal Bank of Scotland (NYSE: RBS - news) .

Her previous non-executive directorships include Home Retail (Other OTC: HMRLF - news) , Gap, Next (Other OTC: NXGPF - news) , Body Shop, Thomson Reuters, Vodafone and Trinity Mirror (LSE: TNI.L - news) .

Actor Elba, famous for his roles in The Wire, Luther and Mandela Long Walk To Freedom, will collaborate with Superdry to design and produce a new premium line of clothing which will be sold globally in stores and online.

Elba will be designing the range with brand and design director James Holder, will be the face of a premium clothing line that will be "evidence of Supergroup's commitment to British innovation".