West Perth-based Great Southern Ltd has posted a drop of 24 per cent in sales of its managed investment schemes projects over the 2008 financial year.
West Perth-based Great Southern Ltd has posted a drop of 24 per cent in sales of its managed investment schemes projects over the 2008 financial year.
The company reported total sales over the year to June 30, 2008, reached around $315 million with chief executive Cameron Rhodes calling the result "disappointing".
Mr Rhodes said the company has started reviewing its operating cost structures with plans to reduce costs in light of lower MIS sales over the year and the ongoing regulatory uncertainty over non-forestry projects.
The company expects to announce key findings from the review iwithin six weeks.
Below is the full announcement:
Great Southern Limited (ASX code: GTP) advises that sales of its MIS projects for the period ended 30 June 2008 have totalled approximately $315 million. This represents a decrease in total sales from last year of approximately 24%. However, when comparing 2008 with 2007 sales on a like for like basis (i.e. excluding the 2007 Beef Cattle project which was not offered this year), sales for 2008 have reduced by 6%.
Commenting on the sales result, CEO Cameron Rhodes said: "Obviously lower sales are disappointing. The result was driven by a number of adverse factors, particularly general market conditions and investor confidence, uncertainty regarding MIS generally and delays in finalising the company's pulpwood plantation project. Based on recent industry estimates of total agribusiness MIS sales this year of around $900 million, Great Southern has maintained its position as market leader and expects its market share to be relatively consistent with prior years at greater than 30%.
"Significantly, sales of the company's high value timber project increased approximately 40% from last year to $84 million. Relative to the company's other products, this project delivers higher returns to the company, as well as having reduced capital expenditure requirements, and is expected to represent an increasing proportion of future sales. Whilst sales of the company's Future Forestry Investment were lower than expected, the lower sales will mean that the majority of the land requirements for the project are expected to be met through the company's second rotation land and external leases, significantly reducing the company's capital expenditure requirements in respect of the project over the next 12 months.
"As usual, our pre-existing securitisation arrangements mean that the majority of the 2008 MIS sales provide almost immediate cash to be used within the group. Nevertheless, with the lower MIS sales this year and the ongoing regulatory uncertainty over non forestry projects, we have commenced reviewing our operating cost structures and we will now implement plans to reduce our operational costs.
Strategic Review Update
The company has previously advised that it had begun a comprehensive strategic review process to adjust and simplify its current business model to provide more predictable and sustainable profit and cashflow, reduce its exposure to regulatory risk, overhaul its cost structures, lower ongoing demands for new capital and generate enhanced value from its significant agricultural land bank.
In this regard the company is well advanced in revising the company's business model with a focus on the company's core competencies of both forestry and financial services, whilst at the same time seeking to reduce the company's reliance on annual MIS product sales. The Company expects to finalise its review and to announce key findings within six weeks.
Chairman David Griffiths said "This year's MIS sales to 30 June were clearly disappointing, but do reflect the very challenging environment in which the Company was operating.
"Over the next few months the Company will gain some clarity on the future of non forestry MIS, with the ATO test case being heard on 14/15 August 2008 and clarity in respect to the future carbon emission trading system with further details on this matter expected to be announced by the Government shortly. Both of these issues have the potential to provide a positive impact on operations, however the most important and exciting challenge for the Company is the outcome of our own strategic review. The Board is encouraged by the work done on the review to date and we are confident that the outcome of the review has the potential to transform our company and simplify its business model.
"The board is extremely concerned with the company's recent share price and is very committed to enhancing shareholder value as quickly as possible".
