Liquidation proposed for Bendon Group

By Phil Boeyen, ShareChat Business News Editor

Friday 30th November 2001

Bendon (NZSE: BEN) may be the next company to disappear from the NZSE after revealing plans to sell its intimate apparel subsidiary to a consortium headed by managing director, Hugo Venter.

The deal comes at the same time as the group's six monthly financial announcement, which shows life in the lingerie market is proving tough.

The directors of Bendon Group say they have reached agreement to sell the subsidiary, Bendon Limited, to Mr Venter's consortium for around $38.5 million. Settlement is expected by the end of February.

A special meeting will be called for mid-February to consider and approve the sale, which is subject to a number of conditions including due diligence. Shareholders will also be asked to consider a proposal which would see Bendon Group Ltd liquidated, once the sale of the Bendon Ltd is finalised.

"If the sale is approved by shareholders and the conditions are met, $38.5 million of cash will be realised," the board says.

"The directors anticipate that this, together with approximately $17.5 million of cash remaining from the sale of New Zealand China Clays Ltd, will result in a total of $56 million being returned to shareholders."

With some 30.9 million shares on issue the money to be returned to shareholders equates to around $1.82 cents per share. Bendon shares closed Friday at $1.83.

The company's directors will be appointing an adviser to prepare an independent report to enable shareholders to fully appraise the deal.

The proposal was announced after the market closed on Friday in tandem with the interim financial report which shows Bendon made a loss of $1.187 million for the six months ended September. Last year's profit was $21.9 million but that included proceeds from the sale of the China Clays business.

Sales revenue for the period fell to $35 million from $40 million last year while earnings before interest and tax for the period was $10,000, which the company says is in line with previous projections. Last year's Ebit was $1.633 million.

The result included a non-recurring loss of $1.193 million relating to the establishment of the United Kingdom operation.

Bendon says sales revenue growth has been lower than anticipated in both New Zealand and Australia, with retailer competition and general low consumer demand leading to significant discounting in the apparel sector.

Trading conditions have also been mixed, with turnover increasing in New Zealand but decreasing in Australia.

"The Australian market environment has continued to prove difficult following the introduction of GST, as evidenced by the poor financial performances of several of our major customers. As a result, turnover in Australia was down 6% in the period," the company says.

Margins at the business have also suffered, hit by both competitive pressures and increased product costs caused by a low NZD:USD cross rate.

"Despite the tight control maintained over costs, contribution levels have been reduced compared to the same period last year. The company continues to evaluate sourcing options and expense containment programmes to improve gross margins and profitability."

Initial sales in the UK, where the Elle Macpherson Intimates brand was launched in September, were $459,000 and total revenue to the end of March next year is expected to be around $2 million.

"However it is also forecast that a further non-recurring loss of $1.6 million will be incurred in the second six months," the company reports.

The company says the Christmas trading period, along with the reordering of basic ongoing lines, will prove crucial to the second half performance.

"With all the initiatives that are in hand, together with continued expense savings, the board believe a full year Ebit result (excluding United Kingdom costs) of approximately $5 million is achievable.

"Whilst we remain confident that entry into the United Kingdom market will prove profitable we do not now anticipate achieving a positive contribution from this market until the financial year ending 31 March 2004."

Because of the current trading situation, the worldwide economic position and a lack of imputation credits, Bendon says it will not be paying an interim dividend.

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