JBH Upbeat/PPX Fund Raising Shortfall

Sydney, Oct 8, 2008 (ABN Newswire) - Boom electronics retailer JB Hi-Fi Ltd had a day of wide trading swings yesterday brought about by the early market sell-down, then by a trading update which allowed it to ride the late market surge.

JBH said at 10.54 am that sales in the first quarter of fiscal 2009 were on budget.

That saw the shares bottom at $10.23 after opening at $10.55; they then edged slowly higher as the overall market steadied around noon.

JBH shares moved into positive territory in the early afternoon to be up 85c, or 7.6% in the afternoon post rate cut rebound. They closed at $11.95.

The company said earnings for July and August were ahead of budget with margins remaining solid and cost control was "good". No figures were mentioned, nor the forecasts in its August outlook statement.

"Both sales and earnings are well up on the previous year," JB Hi-Fi said in a trading update.

"All six stores opened so far this financial year are trading well."

The company said it had yet to finalise its September quarter's result.

JB Hi-Fi brushed off a spending slowdown to book a 61.2% lift in annual profit in fiscal 2008.

In the August report the company was upbeat about the 2009 year:

"Sales for July and August FY09 YTD have been very strong driven by Games, Movies, Computers and Visual. Consolidated comparable store growth for the first 7 weeks of trading in FY09 was 19.2% continuing our impressive comp store growth of the previous year" said (CEO Richard) Uechtritz.

"As this is only 7 weeks and we have the all important Christmas trading period ahead of us, we maintain our previous sales guidance in FY09 of circa $2.35 billion or 28% increase on FY08."

The retailer said yesterday the update followed Harvey Norman's announcement last week that profits had fallen 18.3% in the first two months of fiscal 2009 after losses in Ireland.

"Unaudited preliminary accounts for the period 1 July 2008 to 31 August 2008 indicate profit before tax and minority interests for the consolidated entity of $47.7 million compared to $58.3 million for the corresponding prior period, a reduction of 18.3% ($10.6 million)," HVN directors told the ASX.

"That reduction includes a loss from the Irish operations of $5.6 million. The company has no reason to believe that trading conditions in Ireland will improve in the near future."

HVN shares rose 12c to $2.93.

And PaperlinX seems to have fallen around $50 million short of its target of raising $200 million from institutions through an accelerated non-renounceable entitlement offer.

The paper merchant and manufacturer said yesterday that the institutional component of its rights issue announced on October 1 had raised $150 million from new and existing institutional shareholders.

The company had originally talked about getting $200 million from institutions and up to $100 million on top of that from the retail component of the offer.



Now the company says it's looking to raise up to $77 million from the retail offer which opened yesterday.

The entitlement ratio was set at two new shares for every five existing shares held in the company as at last Friday evening, with the offer price for both the institutional and retail offers set at $1.25 per new share.

However, the market took a set against the company because it knows that the shortfall means the group will be under pressure to sell assets to raise money.

Selling assets in this climate is a big ask and it could very well not achieve that because of a shortage of finance and any purchaser.

The issue was undertaken after the likelihood of asset sales to raise the funds to meet the debt reduction demanded by the lenders didn't eventuate.

PPX shares shed as much as 29%, or 50c, to $1.25 at one stage. They ended at $1.36, off 39c or 22.3% as investors took a glum view of the shortfall news. The shares had been suspended from September 26 while the institutional offer was conducted, so there was also an element of catch up for the recent losses.

The company said that the net proceeds will be used to repay debt, including the committed $150 million reduction in PaperlinX's multi-currency facility by May 2009.

Brokers say the capital raising is crucial for PaperlinX, which has been hit by weak paper demand, rising costs and the impact of a strong Australian dollar which made imports cheaper.

That factor has largely vanished with the plunge in the value of the dollar, while inflation is expected to start easing (thanks though to the impending slowdown). Interest costs will fall after yesterday's 1% rate cut, so there may be a glimmer of light at the end of the company's very gloomy tunnel.

New shares issued under the institutional entitlement offer will be allotted and commence trading on October 15. The retail offer closes on October 24.


 

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