Perth-based Ammtec Ltd has rejected the takeover offer from Brisbane-based Campbell Brothers as too low, and has forecast strong earnings growth in the 2011 financial year.
Ammtec chairman, David Macoboy, said in a statement to the ASX yesterday that the proposed offer, made a week ago, was opportunistic and attributed no value to the substantial uplift in revenue and earnings expected by the company in FY11 and beyond.
"Given Ammtec’s bright outlook and our forecast of a very strong year in FY11, we believe this proposed offer significantly undervalues our company by any reasonable measure," Mr Macoboy said.
Campbell Brothers announced an intention to offer $3.35 per Ammtec share, with a scrip alternative of two Campbell Brothers shares for every 17 Ammtec shares.
Ammtec said it expected Campbell Brothers’ bidder’s statement shortly.
The rejection was expected by some in the market because it’s standard operating procedure to reject a hostile offer and try for a higher price.
That’s what happened last year when Campbell first bid for Perth-based Pearlstreet. It rejected the Campbell offer, but agreed to a higher price after negotiations (and a lot of hot air between the two groups).
The Ammtec situation looks similar.
The company yesterday forecast an increase in net profit in fiscal 2011 to between $11.1 million and 12.9 million.
"Revenue is expected to range between $73 and 79 million. EBITDA is expected to range between $19.6 and 22.2 million," the company said.
Ammtec confirmed FY10 net profit would be in line with recent broker expectations, on the back of improving conditions in Ammtec’s markets and the benefits of internal restructuring.
"However, there is a possibility that full year FY10 results may fall slightly short of one or more of the three thresholds set out by Campbell Brothers in its takeover announcement on 18 May 2010," the company said.
These were "revenue from continuing operations of more than $52.5 million, operating EBITDA of more than $12.4 million and operating EBIT of more than $10.3 million.
"In particular, unexpected costs associated with responding to the unsolicited offer from Campbell Brothers will impact on FY10 EBIT and EBITDA performance."
A formal recommendation from the Ammtec board will be included in the target’s statement to be issued in response to Campbell Brothers Bidder’s Statement in due course.
In the meantime, Ammtec told shareholders to take no action in response to the Campbell Brothers offer.
Ammtec shares ended steady on $3.22 yesterday.
Campbell shares rose, and then fell to end off 9c at $27.05 after Tuesday’s fall in the wake of the lower profit for the 2010 financial year.
And the market didn’t like the third quarter update from domestic airline Regional Express Holdings yesterday.
The airline said it expects net profit for 2009-10 year to come in either at or slightly below the prior year.
"Rex expects profit after tax for FY2010 to be between $21.5 million and $23.0 million," the company said in a slide presentation containing its third quarter results released on Wednesday.
Rex reported net profit of $23 million for 2008-09.
The shares fell 2.5c, or 2.4%, to $1.02.
At its half year earnings announcement three months ago, Rex forecast net profit would be "close to that achieved" in 2008-09, so the latest update indicated there has been fall in margins since then.
That’s confirmed by the decline in load factors and revenue in the third quarter, despite an improvement in passenger numbers.
Fuel cost rose slightly as well: it was 14.4% of total costs in the third quarter, up from 13.8% in the prior corresponding period.
Profit before tax fell 41% to $4.4 million in the three months to March 31, 2010, from $7.5 million a year ago.
The result included $2.61 million of one-off items – $1.96 million due to the sale of aircraft and $0.65 million due to the sale of Virgin Blue shares.
Figures for the nine months to March 31, showed Rex suffered a 6.2% fall in passengers, compared with the prior corresponding period, with load factors down by 4.1 percentage points to 62.5%.
