Feltex Under Fire from Godfrey Hearst for 2H Resul
Auckland, New Zealand, February 22, 2006--Struggling carpet maker Feltex made a $12 million interim loss and has come under stinging attack from rival and shareholder Godfrey Hirst, according a report on Stiff.co.nz.
Jim Walsh, finance director at Godfrey Hirst, an 8.7 per cent shareholder, called the result "a shocker."
He said Feltex's underlying earnings did not support its current share price and Godfrey Hirst, previously keen to take over Feltex, was considering selling its shares.
"The company is performing terribly. It is losing market share at a rapid rate, its margins have deteriorated rapidly and they're again trying to paint a positive picture. It's just rubbish."
After absorbing $15 million of restructuring costs, Feltex said yesterday that it lost $11.8 million in the six months to December, compared with a $12.9 million profit last year.
Sales tumbled $21.5 million and margins fell to 20.6 per cent from 30.6 per cent.
Feltex chief executive Peter Thomas said the objective of New Zealand's McKendrick family, which controls Godfrey Hirst, was to buy Feltex or its businesses as cheaply as possible.
Mr Thomas said no guarantee could be made to shareholders, who bought shares for $1.70 each in a June 2004 float, that the situation would improve in the next year.
"How can I guarantee that?" Mr Thomas said.
"You tell me where the currency is going to be in 12 months, you tell me where housing starts are going to be, you tell me where consumer confidence is going to be. It's an impossible question to answer."
Feltex shares fell 2c to 48c yesterday. They crashed to a low of 39c in June last year after two profit warnings within three months.
A restructuring, including firing 302 workers and closing a Melbourne yarn plant, had strengthened Feltex's fundamentals, Mr Thomas said.
Inventory haf been cut by $12.5 million to $70.7 million.
"Significant" challenges remained, however. Thomas said the New Zealand market was more challenging than a year ago while Australia, where Feltex makes 75 per cent of its sales, was much the same.
First NZ Capital analyst Andrew Mortimer said there was still a long way to go to turn Feltex around.
But there were encouraging signs, such as the normalized operating earnings of $12.5 million, excluding one-off costs, compared with the $7 million of actual earnings.
"It's still pretty tough out there," Mr Mortimer said. "I guess they're hoping for a few things to go in their favour, currency for one, and raw material prices."
Thomas said Feltex had finished reviewing its Australian synthetic carpet operations and had decided to stay in that business.
Godfrey Hirst, which had a reverse takeover proposal rejected by Feltex's board last year, had held further talks with Feltex on two "rationalization" opportunities.
