Owens Group takes long, slow road to recovery

Friday 25th June 2004

Owens Group, owned 80% by Mainfreight and 12% by Toll Holdings, appears to be on the road to recovery but it could be a long haul for the diminished freight company.

Owens reported a net deficit of $5.79 million for the year ended March 31 compared with the previous year's loss of $636,000. However, comparisons with previous years are of little use because of the company's transition period.

While the result was disappointing and hurt Mainfreight, most of the deficit came from non-recurring items.

On a positive note, the group's sale process appears to be progressing well. So far it has gleaned $29 million from asset sales, with its loss-making Australian domestic operation also on the block.

The assets relate to a range of industrial container services, including container storage, repair and maintenance services, provided by Owens subsidiaries Owens Containers Services Ltd and Westfield Container Depot.

It also includes Owens' share in three container services joint-venture companies: Suva Container Park, Tauranga Container Park and Transport Systems 2000. The sale is conditional on lease arrangements, the release of a deed of guarantee and the waiver of pre-emptive rights in relation to the transfer of the Tauranga Container Park shares.

Forsyth Barr estimates that once all the sales are complete, the company will have stopped the majority of loss-making operations and have in excess of $15 million in cash.

This presents the opportunity for a cash return to shareholders.

Management has indicated a three- to four-year target for earnings before interest and tax of $8-10 million from the remaining operations but that is not likely to be easily achieved.

With a market capitalisation of $61.2 million it's hardly in a position to get into the driving seat of industry consolidation and may have to fight the giant Toll for market share in trucking.

Owens' shares have been held up in part by sentiment that Mainfreight might take over the balance of Owens Group and in part by a belief in the recovery story.

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