Out of Feltex and into Africa

One day after slashing Feltex's full-year profit forecasts, the carpet-maker's chief executive, Sam Magill, and three of his senior managers flew out with customers on a South African safari.

Among New Zealanders the troubled company hosted was Hills Floorings director David Hill, who described the 10-day safari as the "trip of a lifetime".

Hill said Feltex extended the invitation last April as an incentive for meeting a particular sales target for the year. Also on safari were representatives from 24 Australian carpet retailers.

Their departure on April 2 was the day after Feltex warned that its annual profits would be $15 million to $16 million, compared with last year's prospectus profit forecast of $23.9 million.

This represented a cut in forecast second-half profit of about 70 per cent.

Feltex blamed tough market conditions, a shortage of carpet-laying contractors, low store traffic, increased price competition and the strong kiwi dollar for the downgrade.

On the day of the warning, Feltex lost almost a third of its market value, its shares crashing 46c to $1.04.

They have since fallen further amid investor anger, and are trading at about 74c.

Hill did not think much could have been done to cancel the trip as it would have been set months in advance. He saw it as being totally unrelated to the state of the company at the time.

" This was something promised to us well before this problem arose," he said.

Feltex's problems were discussed at the end of the trip but information did not go beyond what the company had told the sharemarket.

Guests were otherwise dissuaded from "talking business" on the trip and were fined R100 for doing so.

Feltex chairman Tim Saunders said he would rather not comment on the trip, saying Magill had the full support of the board.

"One of his great strengths is understanding the market and understanding the customers. To the extent he takes people away or entertains or talks to them one-to-one, I think they are all legitimate ways of ensuring that he's on top of those issues."

Shareholder reaction to the trip has been muted. One said he did not have any strong views on whether the trip was a good use of Magill's time given the "crisis" the company was in.

Shareholders Association chairman Bruce Shepherd said corporate "schmoozing" of customers was common in every industry.

"This happens all the time."