Why is the board and management of struggling apparel and bedwares group Pacific Brands (PBG) struggling over the company’s future direction?
From the weak share price and the downgrade last month, it’s clear the company’s immediate future is weak, and the medium to longer term future is just as problematic.
The question comes to mind after the latest CEO John Pollaers quit yesterday after a reported boardroom struggle over the company’s future.
The shares finished up 1.8% at 55c yesterday, or one cent.
They had risen to a day’s high of 56.7c after Mr Pollaers’ resignation was announced, then retraced to end at 55c.
Pacific Brands, which makes Bonds and Sheridan sheets among a host of other products, said a search had begun to find a successor to Mr Pollaers.
"John’s decision to leave now has been driven by divergence between his views and those of the board regarding the best path forward for the company and its businesses," chairman Peter Bush said in a statement yesterday.
"This divergence has become clearer as the strategic review being conducted by Macquarie Capital Limited has progressed."
That tells us there are two viewers on the board – one if to keep the company going, the other, backed by Macquarie Bank, is to break up and/or sell off the parts or the company as a whole.
So the hunt for a new CEO seems to be odd – you’d think the board would hold off until Pacific’s future shape had been decided.
PBG 1Y – Pacific Brands’ future uncertain after CEO goes
News of Mr Pollaers’ decision to resign came after Pacific Brands slashed its full year earnings guidance on June 10 and hired Macquarie Group to carry out a strategic review.
The company said last month that it expected its full-year earnings before interest and significant items to be in the range of $90 million-$93 million for the year ending June 30.
That compared with the guidance at the time of its interim results in February when it "implied" full-year EBIT before significant items of about $105 million. It said it expects sales growth of about 3% compared with the previous year.
"A combination of challenging markets, declines in consumer sentiment and a warm autumn" helped contribute to "lower-than-expected sales growth and increased margin pressure" the company said in a statement to the ASX.
And the company warned that net debt is now expected to climb to about $250 million-$260 million this financial year because of "reduced earnings, higher working capital and capital expenditure and additional restructuring cost".
The company blamed the warmer than usual autumn weather for the sales slide, plus the impact of the fall in consumer sentiment after the Federal budget.
In yesterday’s statement, chairman Mr Bush thanked Mr Pollaers for his work in simplifying the company’s business model and improve the performance of its key businesses.
Mr Pollaers said he was proud to have led the company and was grateful for the work his team had done in trying to improve Pacific Brands.
He had led the company for just under three years, having replaced Sue Morphet who quit in September 2012.
Pacific Brands shares fell to 51c after the June 10 downgrade. Yesterday’s closing price is at least a near 9% rise on that level.
