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Wool Equities, surviving on interest income, expects deals in next few months

Monday 26th April 2010

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Wool Equities, which relies on interest from bank deposits for income, said it expects to announce partnership proposals for wool ventures in the next few months.

Earlier this month, the company said it was holding talks with Romney NZ to form a joint venture to produce and market designer rugs in the US. The potential of the market was confirmed by International Design Group, a chain of stores in the US that sells floor coverings.

The company’s last remaining investment, keratin producer Keratec, was sold to US-based Keraplast Technologies last year when the two companies failed to agree to a joint venture.

Wool Equities subsequently bought back two of every three shares held for about $1.4 million, shrinking stock on issue to 15.7 million from 23.9 million.

“Several of these partnerships are close to fruition and we, as a Board, expect to make a number of announcements relating to specific partnerships and product proposals in the next few months,” chairman Clifford Heath said in his interim report.

“We are very confident that we can build the company to deliver both capital growth and a dividend stream.”

The stock, which trades infrequently on the NZAX market, was last at 15 cents on March 23. The company paid 17.4 cents apiece in its buyback.

Wool Equities posted a first-half loss of $542,000, an improvement from the $2.98 million loss in the year-earlier period, which included a $1.97 million impairment of the Keratec goodwill and biomedical intellectual property.

The company may also benefit from any distribution made by the former Wool Board and subsequently passed to the Wool Board Disestablishment Co., which has been tied up in litigation since Saxmere Co., a saxon sheep breed group that succeeded having an earlier Court of Appeal ruling set aside while it seeks to recover levies it says were used to fund rivals in the Merino industry.

A re-hearing has been set for June 30, following retraction of the earlier judgement when it was revealed that Supreme Court judge Bill Wilson had a substantial personal debt to counsel opposing the Saxmere action.

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