Qantas has attempted to quash market rumours it is about to become the target of a $3.5 billion private-equity bid, describing the reports as "pure speculation".
News of the supposed interest saw the shares jump more than 8% on Tuesday. Reports were published in The Australian yesterday, and buried back in the business pages of the Financial Review.
The stories overshadowed the airlines 2011 profit report yesterday which showed the company more than doubled its annual net profit to $250 million from the $112 million made in 2010.
The shares drifted lower yesterday closing down 2c at $1.52 after running to a high of $1.60 before CEO, Alan Joyce strongly denied the rumoured interest and other stories doing the round yesterday about how the airline was cross subsidising Jetstar from its premium business operations.
Mr Joyce said management had not raised concerns in Canberra about the airline being vulnerable to a takeover and described the talk of a looming bid as ‘‘pure speculation".
(The Australian report claimed that the Federal Government had decided to oppose any private equity bid).
"We haven’t tried or actioned on the speculation out there. Unless there is something more firm out there … we are not going to set horses racing," he said.
"The government has to make their own view and has made their own view. We see the value in the company … we haven’t asked the government to come out with any statement," Mr Joyce told a media conference
Mr Joyce said the airline "had not been formally or informally approached by any private equity about a takeover bid".
Shares touched an all-time low of $1.42 this week, then bounced strongly as that private equity rumour was spread.
Of the result, Mr Joyce said in the statement that it "reflects the strength of the Qantas Group’s portfolio and is our best performance since the global financial crisis."
"We achieved the result while overcoming significant external and operational factors, including a series of natural disasters, a 28 per cent increase in average fuel prices and an underperforming international business."
Qantas said underlying profit before tax – the airline’s preferred measure of financial performance – was $552 million, compared with the $377 reported for the 2010 year.
Mr Joyce said in the statement "We are pleased to report improved earnings for Qantas Domestic and Qantas Freight and record results for Jetstar and Qantas Frequent Flyer.
"Given the aviation sector’s inherent volatility, the flexibility to generate revenue from different parts of the business and different market sectors is a major strength for the Group.
"But it is important to put the result in context. The Group’s planned capital expenditure over the next two years exceeds $5 billion. Fuel prices are expected to remain high and there is considerable uncertainty in the global economy.
"Qantas International reported a loss of over $200 million in FY11 on invested capital of over $5 billion, an unacceptable return. Continuing down this path would be unsustainable.
"Last week we announced a five-year plan to turn the international business around. We will reduce investment in underperforming business areas and direct capital towards growth opportunities."
Qantas said it was not possible to provide profit guidance because of the volatility, uncertain economic conditions and the major changes taking place in the company.
And, again no dividend for shareholders.
Another big loss and tough times to come in 2012 for clothing and bed linen producer/importer Pacific Brands which yesterday also revealed it was cutting another 120 jobs, mostly office staff.
The company revealed a full year loss of $132 million, due mainly to the impact of non-cash impairment charges announced at the first half result.
The company said profit was up by 14% to $103.4 million before the significant items.
The net loss compared with the 2010 net profit of $53.2 million.
The company also said that, due to a number of challenges including weak retailing conditions and a higher cotton price, earnings in 2011/12 were likely to decline from the last financial year.
Sales revenue fell 7.3% to $1.61 billion.
A final dividend of 3.1c a share was paid, the same as the interim. That made 6.2c a share for the year. No dividend was paid in the 2010 or 2009 years.
Despite the generally mixed tone of the report, especially the outlook, the company’s shares jumped 14.4% to 71c, a rise of 9c.
The reason, a share buyback to be conducted over the 12 months from September will see the company buying back more than 93 million shares, or up to 10% of the issued capital.
"The company considers a flexible on-market buy-back program an appropriate way to return surplus capital to shareholders and is the most value-accretive capital management initiative at this time," directors said.
The tactic was the same adopted earlier this week by Hills, another mid range manufacturer under pressure from weak earnings and
