New Zealand:Feltex carpets Australian sales decline $11.3mn

Residential & commercial carpets seller Feltex released its audited results.

The Board of Directors confirmed the audited earnings before restructuring costs for the June 2005 year were $13 million and, after one-off restructuring costs, $11.8 million.

“This result reflects the adverse combination of factors that became clear to us in late March."

"They have and are implementing wide-ranging changes to the company. We are single-mindedly focused on rebuilding shareholder value in the business as quickly as possible,“ stated Feltex Chairman Tim Saunders.

Operating revenue declined by 8.8 percent to $300.2 million. New Zealand sales remained strong and were up 8.1 percent for the year while Australian sales declined by 7.6 percent. The strong New Zealand dollar adversely affected the translation of Australian sales into New Zealand dollars. Margins on Australian sales decreased because of price competition from imports, intense local competition and higher synthetic raw material costs.

These factors, and the 8.8 percent decline in operating revenue, lead to the 25.7 percent decline in EBITDA. The operating surplus was $13 million before the one-off costs for restructuring and redundancies including that for the departing chief executive and four other senior executives of $1.3 million after tax.

“The Board has made the decision to revert to six monthly and annual announcements of financial performance rather than quarterly as has been the case for the past year. “Any material matters will continue to be reported to the market as soon as the Board is aware of them,” said Feltex chairman Mr Saunders. “The merger discussions with Godfrey Hirst remain at the stage of seeking reciprocal information and agreeing to the terms on which it is to be shared,” said Mr Saunders.

Annual results for the year ended 30 June 2005
After a strong first half to the financial year, Feltex experienced a difficult and disappointing second half. The net surplus for the six months ended June 2005 was $807,000, compared with a net surplus of $12.2 million in the first six months of the financial year and $13.8 million in the prior corresponding period.

The Group recorded a net surplus of $13 million for the year ended June 2005, compared to $25.2 million in the previous year. EBITDA for the second six months was $8.6 million, down 65% on the first six months of the financial year reflecting a much softer market than anticipated by the Group as well as other significant issues described below.

EBITDA for the year ended June 2005 was $33.2 million compared to $46.2 million in the prior year.

Compared to the prior corresponding period, sales were $15.7 million lower, with the shortfall analysed as follows:

- New Zealand sales increased by $1.6 million;
- Yarn sales in the USA increased by $0.5 million;
- Australian sales decreased by $11.3 million;
- Further, the translation impact of the stronger New Zealand dollar on the Group’s Australian sales reduced reported revenue by $5.3 million (3.4% adverse impact on reported operating revenue);
- The closure of the Company’s rubber underlay operations in the previous financial year accounted for a reduction in sales of$1.2 million.

EBITDA for the year ended June 2005 decreased to $33.2 million, compared to $46.2 million in the prior year. The Group generated EBITDA of $24.6 million in the first half of the financial year and $8.6 million in the second half. The deterioration in the second half has been explained above.

Whilst the EBITDA margin in the first six months was 15.4%, in the second six months this deteriorated to 6.4%. Compared to the prior year, the Group’s EBITDA margin for the year deteriorated to 11.2% from 14.3%.

Australasia’s largest carpet seller The Feltex operation includes wool scouring plant, six spinning mills, three tufted carpet mills, a woven carpet mill and offices in New Zealand, Australia and the United States. The company also leads the way in exports, with customers throughout South East Asia, Japan, USA, the Middle East and other key world markets.
 
Feltex