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Strugglers fail to rouse from torpor

By Peter V O'Brien

Friday 12th September 2003

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The latest reporting round saw the usual sorry, but bravely optimistic, contributions from companies that have long struggled at the bottom of the investment heap.

They were generally ignored in the welter of buoyant reports from companies with sound records and good future prospects.

The weaker operators might get out of their depressed conditions, but it is likely to be a long time before they restore investor confidence.

Certified Organics, Cube Capital, Pure New Zealand and the former New Zealand-founded, now Australian-domiciled Tag Pacific produced results that did nothing to rouse their share price out of longstanding torpor.

The four were representative of companies that hold on over the years with marginal, if any, profitability and regular restructuring until taken over or quietly put to sleep.

Some push through to growth, so it will be interesting to see if any of the current crop make the grade.

Certified Organics developed two years ago from the former AQL Holdings and turned its hand to products for the home and garden.

It is marketing an organic weedkiller in New Zealand and planning a launch into Australia before the end of the year.

Negotiations were under way in June with two separate US investors providing up to $30 million to facilitate the weedkiller's entry to the American market.

The company said any investment would be by way of a joint venture if the initiative proceed.

Chairman Earl Stevens told the annual meeting in June that shareholders should see the possibility of the joint venture proceeding as "warm" rather than "hot."

Many months of negotiation lay ahead.

The problems companies face when reorganising themselves into greenfield ventures were seen in Certified Organics' statement accompanying the report for the six months ended June.

It reported a loss of $899,000 for the period, consistent with the $900,000 signalled at the annual meeting.

It said progress in the local market and the Australian launch would keep the company "on track with its previous forecast final year result to record to deficit of approximately $1.4 million."

Some panache was needed to see "progress" resulting in a $1.4 million loss for a company with shareholders equity of $4.66 million, after allowing for an accumulated deficit of $57.96 million.

The share price was 7c on Monday.

Cube Capital was furniture company Damba until it moved into technological-associated financial services and tourism publications based on technology.

The company retained its interests in the manufacture and distribution of commercial seating.

That division returned a profit in the six months ended June.

A loss in financial services and setup costs in tourism publishing left the group with a deficit of $388,000, for the period, compared with a loss of $651,000 for the year ended December, 2002.

The board believed the fundamentals "are in place to deliver a profitable 2003 second half and solid growth and profitability in 2004."

A share price of 5c last week, compared with a high of 18c in the preceding year, suggested the directors were more optimistic than the market.

Pure New Zealand is another reborn company now in activities associated with the environment, health and related technologies.

The main initiative was Tasman Extracts, trading in "the nutraceutical and herb extraction sectors."

The preliminary report for the year ended June was issued last week and said the company had received an offer for Tasman Extracts and was considering it.

Pure's other activities are in environmental engineering and plastic recycling.

The company was in an unusual position for a listed group at June 30, because the book value of its liabilities exceeded assets,

This resulted in a deficit of $244,000 in shareholders' equity.

There was a loss of $902,000 for the year ended June.

Pure was working toward capitalising outstanding loans in a restructuring move.

The preliminary report expressed the optimism always evident in such cases.

"The restructure, if approved by shareholders, will virtually make the company debt-free and give it a solid base from which it can acquire income-producing businesses in the area of focus from the company."

We will see if the share price can get above last week's 4.5c and the group retreat from the brink of insolvency.

At least Tag Pacific made a profit for the year ended June, albeit only $A16,000 and that came from a tax gain.

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