The resources slump has taken its toll on Perth-based automotive parts group, Coventry Motor Group (CYG).
The company is looking at a very a very sharp fall in 2009 financial year profits, according to an update issued late Friday.
In fact the 2008-09 result looks like being almost a loss and directors warned that red ink could eventuate once asset values and other valuations were examined for impairment.
And, they also warned that the negative trading conditions could extend into the first half of the 2010 financial year, the first company to issue such a warning.
Friday’s new guidance updated an earlier statement on May 4 which forecast net profit would be "significantly below the result for the 2008 financial year."
"It now appears probable that those (financial) results will show normalised (operating) EBIT very close to the result for the previous year (i.e. $10million) and Net Profit after Tax significantly below the result for the previous year’s $6.9 million."
"The current unaudited management accounts disclose that the anticipated normalised operating EBIT is likely to be in the vicinity of $8 million.
"The current unaudited management accounts disclose that the Net Profit after Tax will be a small profit although with the ASIC guidance that Directors pay particular attention in the area of asset impairment in light of the global economic crisis the figure may, post implementation and any audit adjustments, deteriorate to a loss.
"The main factor influencing this market update is the continuing adverse market conditions faced by the Industrial products business unit particularly in the resources sector and consequent infrastructure projects.
"Those conditions have continued to deteriorate since the previous market update and whilst there are some signs of an improvement in general economic conditions it now appears probable that negative trading conditions will continue for the remainder of the 2009 calendar year.
"In the May 2009 Market Update Coventry foreshadowed that the results of the Automotive parts business unit would breakeven in the second half of the 2008/9 financial year and on current results and trends that view is still supported.
"The Gaskets manufacturing and distribution business unit continues to perform well.
"Both Industrial and Automotive business units continue to undertake systematic reviews of their operations and cost bases to scale the businesses to match the market demand.
"The implementation of the new information system into all of Coventry’s wholly owned business units, both in Australia and New Zealand was completed by 30 June 2009 and the system is now operating effectively. Coventry will continue to enhance system functionality to improve operating efficiency."
In late June 2009 Coventry successfully completed the sale of its property in Osborne Park WA. The initiatives Coventry has undertaken in the last six months to reduce working capital have been very successful.
"As a consequence Coventry’s net debt at 30 June 2009 was a little below $20 million. The reduction in net debt from a peak of $83 million in June 2007 to $20 million has been achieved without the need to issue new equity capital.
"Coventry has also successfully negotiated an extension to its debt facility with Westpac Banking Corporation to July 2010.
"As a consequence of its improved debt position and the Directors’ confidence in the future operating prospects the Directors are pleased to announce a dividend of 5 cents per share, fully franked.”
The company didn’t pay a dividend in 2008.
Coventry shares eased 4 cents Friday to 86 cents.
It was a busy day Friday for Murchison Metals.
First the company told the ASX at 3.19 pm concerning the continuing Chameleon Mining claim against Murchison:
"The Company advises that the parties attended a directions hearing earlier today in the Federal Court before His Honour Justice Jacobson. His Honour made orders confirming the trial date commencing 28 September 2009 for four weeks.
‘‘The parties have also been ordered by the court to attend mediation prior to the hearing."
Then around four hours later, just after 7 pm this statement was issued announcing a settlement of a related case.
"Murchison Metals Ltd (“Murchison”) advises that has it has reached a settlement in the legal proceedings brought against the Company by David Evans and SH Koh, former directors of Chameleon Mining NL (“Chameleon”), Murchison said.
"The litigation, which was commenced in March 2005, concerned an agreement made in 2004 between the plaintiffs and Nicu Metals Ltd (now Murchison) before the current Murchison Board and senior management group were appointed. “
The plaintiffs had claimed a 5% interest in the Jack Hills iron ore project and a quantity of Murchison shares.
Under the terms of the settlement, Murchison will issue 3.5 million shares, make a payment of $350,000 and pay the plaintiff’s costs (to be assessed)
Murchison said the matter was due to be heard in the Supreme Court of New South Wales on 10 August 2009.
Murchison Executive Chairman Paul Kopejtka said in the statement that the Board believed settlement of the matter on the agreed terms was in the best
