Feltex money on rescue deal despite $57.7m loss

Carpet-maker Feltex's earnings have fallen deep into the red, but it still expects its much-delayed rescue deal to proceed, it indicated yesterday.

Feltex made a loss of $57.7 million for the year to June 30, compared with a profit of $12.1 million the previous year.

The dramatic bottom-line reversal came after a 9.6 per cent drop in revenue to $271 million, restructuring costs of $13.2 million, up from $1.8 million, and a $35.2 million write-down of its Australian operations, compared with nothing the previous year.

"Due to the company's recent financial performance and reduced market capitalisation, the company has adjusted the value of goodwill to zero," Feltex said.

Impairment losses in its Australian operation totalled $35.2 million as the company wrote down to zero the value of Shaw Industries, acquired in 2000 for $149 million.

Trading profit - ebitda - of $20.3 million, down from $31.6 million the previous year, was in line with forecasts made by Feltex in June.

Meanwhile, talks continue between Craig and Graeme Turner and ANZ Bank to recapitalise and refinance the business, something Feltex had hoped to conclude last week.

The Turner brothers, backed by a consortium of prominent New Zealand businessmen, plan to subscribe to $40 million of convertible notes and underwrite an $11 million renounceable rights issue to existing shareholders at 10c each.

Feltex's debt stands at more than $135 million.

The Turners have the backing of an unnamed bank but need the ANZ's support while new loan arrangements are put in place.

Feltex yesterday indicated it still expected the restructuring to proceed.

In a statement accompanying its results, it said: "These financial statements have been prepared on a going-concern basis, which assumes that the current proposed recapitalisation and refinancing proposal proceeds and is approved by shareholders."

But the directors could not be certain of the outcome of the proposal.

"In the event that the recapitalisation and refinancing proposal does not proceed, there is significant uncertainty whether the company and the consolidated entity will continue as going concerns and therefore whether the company will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements," Feltex said.

In another move, Michele O'Neil, secretary of the Victoria branch of the Textile, Clothing and Footwear Union of Australia, said the union was concerned about the future of jobs and the entitlements of Feltex's Australian workers.

"We've had some discussions with the ANZ Bank, with Godfrey Hirst and with the Turners and we are left with the workers being extremely concerned about not knowing what way the bank is going to go.

"We're waiting for information," O'Neil said.

"I'm not satisfied with any of the answers we've got to date."

Feltex had kept in regular touch but did not have much to tell the union, she said.

Feltex employs about 500 people in Australia.

There was concern about the future employment prospects of highly skilled textile workers should the plants close.

"We find that many workers who lose jobs out of the textile industry, about half of them never work again and there's another third who only find casual and part-time work," O'Neil said.

additional reporting: Richard Inder