Feltex case: Sharemarket hopes ended in liquidation

Feltex hit the stock exchange in 2004 with a promise of strong growth but by the end of 2006, it lay in the hands of receivers.

An asset sale and liquidation followed with the 8000 mainly mum-and-dad investors losing millions.

Feltex floated in May 2004, raising $254 million, and went on to post a half-year profit of $12.2 million, with a target for the full-year of $23.9 million.

However, in 2005, the company slashed its profit forecast twice - first to $15 million to $16 million on April 1 and then less than three months later to $11.5 million to $12 million.

Five weeks before the April 1 profit warning, chief executive Sam Magill had assured analysts Feltex was on track to hit its full-year forecast.

The profit downgrade was blamed on difficult trading conditions, the high value of the dollar, low consumer confidence, competition from imported synthetic products and a shortage of carpet layers.

Magill and many senior executives left Feltex, inventories were cut and a yarn plant in Melbourne was shut down.

In June 2006, Feltex said it expected to make $20 million to $21 million in trading profit and would continue to look for new equity.

But less than three weeks later, it told the market it was in breach of banking covenants and its future hung on the successful raising of capital.

The board in August announced that rival company Godfrey Hirst was putting together a $141.8 million offer to buy Feltex. Meanwhile, Craig and Graeme Turner from the Sleepyhead bedding group were allowed to do due diligence.

Godfrey Hirst pulled out and in September, ANZ bank called in the receivers.

Days after the receivers were called in Feltex's assets were sold to Godfrey Hirst.

ANZ was owed $135 million and the receivers said the bank took a small loss on its investment.

The Shareholders Association in December 2006 successfully applied to the High Court to have a liquidator appointed.