Baycorp joins blowout

By Nick Stride

Friday 15th November 2002

Baycorp Advantage this week joined the list of companies prompting shareholder anger over the adequacy of its disclosures.

Baycorp warned it wouldn't meet its profit forecasts for the June 2003 year, mainly because the synergy gains promised from its merger last year with Australia's Data Advantage were running behind schedule.

The market was savage, slashing the company's already battered share price by half.

The same fate befell Tower a week earlier. The two share price plunges chopped around $650 million from the sharemarket's capitalisation.

Adding Telecom, which saw a more modest fall in percentage terms after "guiding" analysts toward lower full-year earnings forecasts, the market lost more than $1.3 billion of value.

Baycorp came under fire from investors for failing to give any guidance on how much of the anticipated synergy gains had actually been achieved. It said only that operating costs were "tracking above budget," due to "delays in reducing the overhead costs post the merger."

But it said the projected integration benefits of $A15 million a year after three years remained on track.

It said operating cash flows were still strong. But ebitda (earnings before interest, tax, depreciation, and amortisation) for the half year would be equal to or up to 6% higher than the pro forma result for a year earlier. Full-year earnings would be 23% to 28% higher.

Baycorp is trying to claim from its insurer, Royal & SunAlliance, the $A10 million paid to settle the Killorgan law suit against Data Advantage, together with (unquantified) legal costs.

However, it will expense both sums in the first half and record them as a contingent asset on the balance sheet.

If the insurance issue wasn't resolved this year the dividend could be affected, it warned.

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