Food manufacturer and distributer Goodman Fielder (GFF), has been upgraded to HOLD from SELL by Investment Research Group (IRG), after the steep decline in GFF’s shares and as its equity raising nears completion.
GFF is raising $259 million in a 5 for 12 pro-rata Entitlement Offer of new Goodman Fielder shares at an offer price of A$0.45 per New Share. The food company looked debt heavy, and its recent $167 million loss for the year ending 30 June 2011 exacerbated the situation, which led to the equity raising.
The proceeds from the Entitlement Offer will be used to ensure greater balance sheet flexibility for Goodman Fielder so it can pursue medium and longer term value accretive initiatives. It will also provide additional headroom under Goodman Fielder’s financing facilities.
GFF is also undertaking a Strategic Review which is a medium to long term project with management’s next update scheduled for the 17 November 2011 Investor Day. It is management’s intention to action projects arising from the review as they are assessed and ready for implementation.
The Retail Offer opens on Tuesday, 4 October 2011 and will close at 5.00pm (AEDT) on Friday 21 October 2011.
GFF reported a loss of $167 million in the year to 30 June 2011 after the inclusion of a non-cash impairment charge of $300 million, due to weak trading in the Baking division during the second half of the year. Excluding the impairment charge GFF reported an underlying net profit of $133 million for the year, which was still down a significant 17% on the previous year.
Even excluding the impairment charge, GFF’s underlying result was considerably lower and revenue also fell 4% to $2.5 billion. GFF blamed the result on weakened consumer confidence, higher soft commodity costs, fierce retail competition and a strong AUD.
GFF still has issues to deal with including continuing rising soft commodity prices and a new CEO, not to mention its $955 million in net debt.
Recommendation: upgraded from SELL to HOLD.
GFF shares today traded at NZ$0.67
For sharemarket and fixed income trading enquires contact: Dan Stratful at Investment Research Group (IRG) Authorised Financial Adviser (AFA) 0800 437 8489, 09 304 0232, firstname.lastname@example.org **A disclosure statement is available, on request and free of charge.
Disclaimer In accordance with the Financial Advisers Act 2008 (“the Act”) Sharechat is “Class Advice” and any advice or recommendations contained on this webpage is not “Personalised Advice” as defined by the Act. This means Sharechat does not take into account an investor’s particular financial position, financial needs, financial goals, risk profile or asset allocation. Investor’s who require “Personalised Advice” should contact an Authorised Financial Adviser (AFA).
DISCLAIMER: To the extent that any of the content above constitutes advice, it is general advice that has been prepared without reference to investor’s objectives, financial situation or needs. Before acting on any advice, investors should consider the appropriateness of the advice and IRG recommend that investors should obtain appropriate financial, legal and taxation advice before making any financial investment decision. The report is based on information compiled from public information and private research. IRG have completed the report on a best endeavours basis and do not accept any liability of loss or damage. IRG suggest that clients use this as part of a decision making process and check key data before making any investment decisions.
Employees may have an interest in the securities discussed in this report.