Smallgoods manufacturer D'Orsogna Ltd has instituted a corporate restructuring that could result in the sale of shares in the family-owned business, and potentially the entire business, following a sharp fall in profit.
Smallgoods manufacturer D'Orsogna Ltd has instituted a corporate restructuring that could result in the sale of shares in the family-owned business, and potentially the entire business, following a sharp fall in profit.
The business barely stayed in the black last financial year with a net profit of just $10,795, with the company attributing the downturn to changes in the Western Australian retail market.
The biggest change in the WA retail market has been the breakup of Foodland Associated Ltd, which was carved up between Woolworths Ltd and Metcash Ltd.
D'Orsogna's dire result followed a 25 per cent fall in net profit by another major WA food business, Australian Fast Foods Ltd, which owns the Red Rooster and Chicken Treat chains.
D'Orsogna's annual accounts lodged with the Australian Securities and Investments Commission disclosed that D'Orsogna Ltd has recently been demerged from the D'Orsogna Group.
The board of directors, chaired by University of WA business school dean Tracey Horton, said the demerger would deliver a number of benefits, including making it more attractive to a potential investor or acquirer.
"It is considered that the demerger will create a less cumbersome ownership structure and an entity that would be focused solely on the core business of manufacturing and distributing smallgoods," the directors said.
The commercial benefits would include "an improved ability of the company to pursue expansion opportunities, shareholder flexibility, the ability to introduce employee incentive schemes and greater attractiveness of the company to a potential investor or acquirer."
An injection of new equity into D'Orsogna Ltd, or sale of the business, would allow members of the D'Orsogna family to release some of the value they have tied up in the business.
In particular, it would allow the business to repay some of the $12 million currently owed to the family company D'Orsogna Bros Pty Ltd.
The D'Orsogna family established the business in a West Perth butcher shop in 1949.
Three members of the family serve on the board of directors but the family has not been involved in management of the business since the early 1990s.
The company's annual accounts show that net profit fell to $10,795 in the year to June 2006 from $1.39 million in the previous financial year.
This continued the group's roller-coaster ride: net profit fell to $218,000 in 2004 but was a healthy $2.0 million in 2003.
The latest fall in profit followed a slight decrease in sales to $81.1 million.
"This decrease is due to a reduction in tonnages sold as a result of the restructure of the Western Australian retail market sector," according to the directors' report.
Meanwhile, Australian Fast Foods earlier this week reported a 25 per cent fall in net profit to $4.2 million.
This followed a small decline in revenue to $322 million.
AFF continued to restructure its business, with the sale of more company owned stores to franchisees.
