Woes not over for Feltex shareholders

Troubled carpet maker Feltex today posted a $13 million profit for the year ended June 30.

The unaudited result, which excludes one-off restructuring costs, is a touch better than a shock earnings guidance of $11.5 million-$12 million released last month, but still far below prospectus forecasts of $23.9 million.

The June 20 profit warning stunned the market, with investors claiming they had been sold a "dud".

Investors last year paid $1.70-a-share in Feltex's $254 million IPO, the local market's largest during 2004.

Since then, shareholders have seen their stock plunge as far as 39c. The stock opened up 4c at 62c today on the news.

Feltex said today it was moving "with urgency" to improve profitability.

Forty-two staff will be made redundant, inventory levels are being reduced to match sales demand, and a review of operations is "continuing".

Today's result excludes a series of one-off redundancy payments totalling $3.4 million before tax. This includes $1.2 million in payments to the firm's chief executive, Sam Magill, and four senior staff -- who walked the plank as questions arose as to how Feltex's management could be so out of touch.

Feltex said the small improvement on last month's earnings guidance was due to slightly higher sales, lower rebates to retailers, tighter control of overheads, and a better performanc e by Feltex's 50-per cent-owned carpet retailer Carpet Court.

The Feltex board is seeking financial information from its Australian rival Godfrey Hirst about a possible merger.

Today's preliminary result doesn't spell the end of the bad news for Feltex shareholders. Lower sales, pressure from imports and tighter margins are expected to continue in the first quarter of the 2006 financial year.

Consultation is underway with staff and unions at North Island yarn and carpet plants about temporarily reducing the working week to curb excess inventory levels.

The search for a new chief executive is still underway, and Feltex hopes to make an appointment by its annual meeing in December.

The company will announce its audited results on August 24.

- NZPA