By Ian McIlwraith
STRATHFIELD Group, which seems never to have recovered from the dotcom detonation a decade ago, has decided to do the right thing by its shareholders and de-list the company.
Insider is not quite sure how that helps them. If the stock exchange approves the move, investors will lose a market for their stock that they only regained a year ago when Strathfield re-listed.
The car radio and mobile-phone flogger is hoping to eliminate the background noise of having its shares trading infrequently and at 0.1 cents — the lowest possible price on the ASX — while it negotiates some sort of deal. Only, it has no deal on the table.
The application to de-list Strathfield was buried towards the end of another of the "further company update" announcements at the end of a paragraph beginning, "On a positive note".
The even worse news for Strathfield seems to be that it has now exited the only part of its business that was making a profit — its equipment-leasing business — because its financiers reckoned they could no longer support it.
The business business (not a typographical error!) made $5.59 million last financial year when Strathfield emerged from administration and returned to trading under direction of chairman Vaz Hovanessian and his team. The group said yesterday it expects to report a $2.12 million profit for the closed division this financial year, which is less than it made in the first half. That could get worse if there are any asset write-downs or other adjustments before audited accounts emerge.
The retail business, is expected to lose even more money this year than the $994,000 it lost in 2010.
Hovanessian and crew have been closing stores and paring back costs to conserve cash and said they are looking for merger options, or considering selling another division.
They reckoned that trying to do a deal while the market had a value on the company ($3.3 million at yesterday's close) that they felt does not represent the worth of the company's assets and goodwill could mean investors would end up short changed.
Given that Strathfield now has well over 3 billion shares on issue from previous attempts to cope with its financial difficulties, Insider reckons dilution of equity is probably not much of a concern for long-term investors.
Besides, the announcement said that "the board wishes to point out that no acquisition or merger opportunities have yet been identified or negotiated".
Not so good on paper
HOPES of PaperlinX investors that the leap in the company's share price last week was the start of something good seem to have been dashed by the group's nebulous "restructuring" announcement. PaperlinX did confirm, in a separate response to a price query from the stock exchange, that it suspended trading of its stock on Friday due to that "speeding ticket".
The group also said that it was still analysing information and preparing an announcement when the exchange asked for an explanation.
That may explain why the statement it did make has some detail on the likely financial impact of its restructuring, but none on how it will achieve the reforms. That suggests that the group has had to go public before it was entirely ready, which means that it would most likely (and rightly) like to tell affected employees what the impact on their futures will be.
It was probably of little comfort to PaperlinX shareholders to see the forecast after-tax loss for last financial year will now be closer to the top end of its estimated $23 million to $30 million range, which was one reason for the shares easing back 1¢ to 16.5¢ yesterday.
That is before tacking on an expected one-off $10 million after tax as the cost of the restructuring — an amount that it says it can fund from its cash reserves and not breach any lending covenants. PaperlinX estimates that it will save $14 million pre-tax this year, and $17 million annually from the changes.
The other piece of good news for PaperlinX investors was that it again declared a dividend on its "step up" preference shares, which means that the company is confident of its cash flows.
The skinny on SensaSlim
DIET spray promoter SensaSlim Australia has been put into administration, with a company spokesman blaming the move on having its bank accounts frozen by the competition regulator two weeks ago.
Terry Harrison, who acts as legal adviser to SensaSlim, also said that the company plans to widen its defamation action against La Trobe University academic Dr Ken Harvey. Harrison said SensaSlim's sole director, Peter O'Brien, will add himself to the action and personally finance it. That followed a statement from Harvey that he would be asking his lawyers to have the action struck out, given the SensaSlim administration.
Insider understands that SensaSlim's administrator, John Kukulovski from Jirsch Sutherland, will most likely recommend to creditors that the company be liquidated rather than traded out, leaving in limbo 100-plus franchisees who are understood to have each tipped in $60,000 for the right to a selling territory.
That does not mean the end of the product, which retails at the phenomenal price of more than $1000 a litre, because there is also SensaSlim Sales (Australasia), which is not in administration and seems to own all the shares in the other SensaSlim.
Curiously, though, KMB Business Advisors last month sent a note to the Australian Securities and Investments Commission saying that it was withdrawing its permission to be the registered office of SensaSlim sales because "we have attempted to contact this client on numerous occasions without response".
Harrison says KMB withdrew due to the bank account freezing (Insider understands there was only $280,000 in the till), although a KMB director said he did not believe money was the issue.
SensaSlim has also recruited Sydney barrister Geoffrey McDonald to fly to London and sort out a few things with SensaSlim International. McDonald, a former partner at Hall Chadwick who Insider believes is in the final few months of his two-year ban from acting as an insolvency practitioner, seems a perfect choice to help SensaSlim at this delicate time.
insider@fairfaxmedia.com.au