Profits: Hastie Does Better

Air conditioning and refrigeration company Hastie Group Ltd has reported a strong rise in underlying earnings and maintained its full year earnings guidance.

The company said that while net profit for the December half year was $9.99 million, down from $11.32 million in the previous corresponding period, on an underlying basis, earnings jumped almost 65 per cent to $10.15 million.

Underlying EBIT (earnings before interest and tax) rose to $18.22 million from $11.78 million.

Earnings per share jumped by almost 51 per cent to 8.9c from 5.9c, and an interim dividend will be paid of 5.5c a share.

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Profits: MCC, HWI, SRA

Brisbane-based Macarthur Coal posted a sharp drop in first half net profit yesterday but says the full year is still on track.

The company has already signalled that earnings in 2007 would be lower because of various reasons but especially lower export prices as well as problems at the export and rail facilities and changes in mining policy.

Macarthur said that first half profit fell almost 50 per cent to $42.4 million, from $82.1 million in the first six months of 2006 financial year.

“Macarthur Coal’s profits were primarily affected by the 30 per cent reduction in the US dollar coal price in April 2006 from the record previous price,” the miner said.

But analysts said the result was better than the the market had been expecting and the coal miner has reaffirmed its guidance for a net profit of $63 million to $73 million which was given at the 2006 AGM.

Sales fell 22 per cent to $216.2 million from $277.6 million.

“Rain has impacted coal mining in the March 2007 quarter and port congestion has increased,” Macarthur said.

“Coal inventories are also low, leaving the company without stocks to cover unplanned production stoppages.

“Despite the weather-related delays in shipping, the company confirmed that it expects to meet its 4.5 million tonne annual shipping target subject to no further interruptions caused by rain or port congestion.”

Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 48 per cent to $64.5 million and the company sliced its interim dividend by half to 11 cents a share from 23 cents a share last year. Earnings per share naturally fell from 47.1c to 22.6c in the latest period.

The shares eased 6c in the sell off yesterday to $4.87.

Takeover target Housewares International has posted a $29 million loss first half and omitted dividend thanks to its underperforming Australian homewares business.

The $29.1 million net loss for the six months to December 31 compares with a net profit of $11.67 million in the first half of 2006.

The overall result was dragged down by $37.2 million in significant items, primarily a write-down of the assets of the Australian homewares business.

Housewares, which sources products offshore and on-sells to its Australian customers such as department stores, said its Australian homewares division suffered a $6.1 million loss for the six months to December 31.

This compared with a $900,000 loss in the previous corresponding half (and the reason why it has been looking to unload the business, without success).

Housewares said that the continuing losses primarily result from fierce market competitiveness, in particular significant direct import by major customers and associated discounting.

The company has been warning of this for at least 18 months as big retailers, such as Myer and Target, Kmart and Big W move to directly source homewares products from manufacturers in China.

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Another Bid For QGC

Shareholders in Queensland Gas are doing very well: the company has just received another takeover offer, taking the number of full offers to three and ‘deals’ to one.

Sounds confusing. It should. There have been two bids from Santos, both now abandoned after the ACCC said no. AGL Energy has THE deal on the table at the moment which would give it a 27.5 per cent stake in exchange for long term gas supply contract.

And now US investment firm The TWC Group has launched an $812 million takeover bid for QGC.

The offer is well-timed, coming just two days before the QGC shareholders meeting tomorrow to discuss and approve or say no to the AGL deal, which is valued at around $292 million for the share deal.

After the TWC offer, Friday’s meeting might be off.

TWC is offering QGC shareholders $1.51 per share in cash or preference shares or a combination of each.

QGC shares rose in yesterday’s sell off to finish 18.5c higher at $1.54.5c on more than 11.5 million shares.

The cash offer will be tasty for shareholders after the sell down yesterday which has made investors twitchy.

Cash in the hand beats future promises in unsettled times, capital gains tax and all!

TWC said its offer was within a value range provided by an independent expert and represents an 11 per cent premium to QGC’s closing share price on Tuesday.

TWC, which has about $150 billion in assets under management, said its offer was superior to a proposal for QGC by AGL Energy.

“Our offer provides QGC shareholders with superior value and allows QGC shareholders the opportunity to participate for all of their shares, unlike the AGL proposal, which only included a limited 12.5 per cent buyback option,” TWC managing director Blair Thomas said in a statement.

QGC previously backed a proposed $292 million deal with AGL that would involve AGL taking a 27.5 per cent in QGC.

Last week, oil and gas producer Santos dropped its bid for QGC, which would have resulted in the creation of a “new” QGC, after opposition from the competition watchdog.

Santos kicked off the bidding at $1.26 a share which was too low; AGL slipped in with the placement/contract deal that sort of put a price of around $1.44 a share on QGC.

Santos then recast its offer into an old QGC/new QGC which it said effectively valued the company at around $1.80 a share (the ‘new’ company would be spun off, with Santos taking a large but not controlling stake).

The basic offer though was $1.30 a share and the promise of the spin off. The ACCC knocked that on the head so now TWC appears to have the upper hand.

TWC said it has an investment plan for QGC’s Undulla Nose coal seam assets and intends to ensure that QGC’s gas resources are commercialised soon.

“In addition to the development of QGC’s reserves, we will seek to address existing infrastructure bottlenecks that inhibit efficient development of Eastern Australian gas markets,” Mr Thomas said.

TWC said under its offer, QGC shareholders can receive their consideration in the form of 10 per cent preference shares that can be put into the company for one year.

If they elect to receive cash, they can also receive a maximum of 25 per cent of their consideration as preference shares instead.

TWC’s offer is subject to conditions including a minimum of 50.1 per cent acceptances.

Los Angeles-based TCW, which has about A$150 billion of assets under management, claims to be one of the biggest investors in coal seam methane in the world.

The company’s energy and infrastructure unit has more than $7.4 billion invested in more than 190 energy projects and owns stakes in five large coal seam gas operations, mostly in the U.S. and Canada. This deal, if successful, would be around 10 per cent of that total. TWC is part of the asset management arm of the European bank, Societe Generale.

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Goodman Improves

Only the New Zealand economy, its operations in that country and high commodity prices, stand in the way of food giant, Goodman Fielder, achieving its full year prospectus forecast of a pro-forma net profit of $223.9 million.

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WOW Wows

The enormity of the gulf between Woolworths and Coles was driven home yesterday when Woolies produced net earnings for the first half of 2007 that went within $100 million of matching the amount Coles expects to make in a full year.

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OneSteel Earns More

Like Promina and Suncorp-Metway OneSteel’s latest results are interesting in a historical sense but it’s the immediate future that holds the key to the company’s progress and profitability because of the dramatic changes that about to happen.

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Domino’s Also Surprises

Another stock to surprise on the downside was fast food darling, Domino’s Pizza Enterprises, promoters of the pan pizza based eating experience in Australia and in several major markets overseas.

The company yesterday revealed a first half that showed the pan pizza eating experience isn’t luring as many Australians to Dominos as before, but is still proving seductive to pizza eaters in parts of Europe.

As a result the shares shed 12 per cent in value, or around 40c to $3.25, after it reported a 46.2 per cent fall in first half profit.

That’s a big ouch and the confident story about overseas expansion wasn’t enough offset the fact that like Coates, DOM needs to do well in its home base to earn solid profits.

The company did warn in October after the first quarter, that earnings would down by at least “$1.2 million” because of the problems in Australia but they have continued, given the downturn for the full six months.

Those problems involved promotion and the high crust pizza product which seems to have done poorly.

For a company like Domino’s growth can come from converting sales gains in foreign markets into earnings a little down the track but the simple fact is that to maintain its rating among investors, it needs to sell more pizzas in Australia.

And it didn’t do that well enough in the first half of 2007, thanks in part to the high proportion of company-owned stores in Australia as against franchised outlets which generate fees and other income streams..

The company said net profit was $3.5 million for the half year ended December 31, down from $6.5 million in the corresponding period.

Not even an expected second recovery in after tax earnings (a forecast of a 40 per cent rise on the first half) could offset the market’s suspicion.

CEO Don Meij said the result reflected the impact of its expansion into Europe and poor performance in Australia in the first quarter.

He said while Australian same store sales growth had been weak, European same store sales growth was 12.5 per cent, the New Zealand was also solid (compared to Australia).

European operations are “tracking better than planned” and are expected to make its first profit contribution in 2007/08.

But the company said the EBITDA (earnings before interest, tax, depreciation and amortisation) in Australia was off almost 17 per cent because of weaker promotions and start-up costs associated with the new in-house equipment maintenance and supply department.

Mr Meij said the company would begin reducing the proportion of corporate stores over the next 12 months from 30 per cent to around 15-20 per cent.

“This move will refocus our corporate stores into cost-effective geographic locations and reduce administration overheads, while still maintaining the benefits of the hybrid corporate-franchise store model,” he said.

Sounds like franchise speak for ‘we’ll be cutting the influence of earnings from our own stores and get income streams from selling the surplus locations to outsiders’.

That’s a switch in approach from the previous approach of maintaining company owned outlets above what is considered normal in some areas of franchising.

The company’s revenue rose 36.4 per cent to $118.1 million in the first half while network sales increased by 42 per cent to $251 million.

Domino’s is the master franchiser for the Dominos Pizza brand in Australia, New Zealand, France, Belgium and the Netherlands and it and its franchisees operate 645 stores: 457 stores of those are in Australia and New Zealand, so when Australia is offsong, the company is offsong as well.

Domino’s declared a first half dividend of 4.1 cents.

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