Continuous disclosure

After a quiet spell for Christchurch retailer Smiths City, the news came like a lightning bolt.

Smiths City told the market just over a week ago that it was in line for a huge tax windfall "which will result in little or no tax payable for some years".

The market lapped up the news and, in the past week, the company, which trades through the Smiths City and Powerstore retail chains in the South Island, has seen its share price rise from 70c to 85c on Thursday.

Smiths City followed up swiftly with the announcement of a special dividend of 1.5c a share with no imputation credits attached, a result of the tax windfall.

That sent the share price rising again and it closed yesterday at 87c.

The tax windfall dates back to 1991 and was uncovered by Smiths City's accountant PricewaterhouseCoopers. Smiths City had no idea it was eligible for the refunds, which relate to inter-company loans which arose from the restructuring of the group in the 80s and 90s.

Smiths City has now done a deal with the Inland Revenue Department confirming tax deductions of up to $52 million. Smiths City will get a refund of between $2 million and $3 million for the 2003 to 2005 years. Further out, the company will pay little or no tax for years.

The company, with a market cap of $45.5 million, is now celebrating its highest share price this year.