West Perth wine producer Palandri Ltd has suspended trading in its shares on the London Stock Exchange's Alternative Investments Market, citing issues with internal group transactions and warning that interest costs may hit net proft.
West Perth wine producer Palandri Ltd has suspended trading in its shares on the London Stock Exchange's Alternative Investments Market, citing issues with internal group transactions and warning that interest costs may hit net proft.
In a brief statement, Palandri said it was having trouble determining the accounting treatment of funds raised from the inter-group transfer of the rights to the future use of the Palandri brand from the listed entity to its Margaret River Wine Business Trust.
It also said that its net profit may be significantly below market expectations after being hit by higher-than-anticipated interest costs relating to debentures issued to finance loans for investors in its tax-effective investment schemes.
Palandri's corporate structure has long been a source of confusion to outsiders, with several related companies focused on different functions - from the actual wine operations to its high profile fund raising arm and a financing company.
Controversial since its inception as a tax-effective investment structure which has raised well over $100 million and built a huge production facility in the heart of Margaret River to propel it into the ranks of the state's biggest producers, Palandri's AIM listing in June 2004 shifted focus on the company from Perth to London where it is a small player.
Before their suspension, Palandri shares were trading at about 60 per cent down from levels achieved a year ago.
Below is the full announcement from Palandri:
Temporary Suspension - Palandri Limited is currently in the final stages of preparing its financial statements for the year ended 30 June 2006.
A conversion of the existing interests of investors in the Margaret River Wine Business to units in the Margaret River Wine Business Trust has begun and Palandri will continue to manage the wine production activities of the Trust on a term basis. As part of the arrangements, Palandri entered into a contract on 25 June 2006 for the sale to Margaret River Wine Business Trust of rights to the future use of the Palandri brand in relation to the wine business. The consideration was A$4.5m, together with applicable GST, payable as to A$200,000 together with GST due on the whole amount on 25 June 2006 and the balance payable in instalments over a term of 8 years commencing on 25 June 2008 together with interest. Palandri retains the use of the brand name in its other investment and property related activities. The rights have no current carrying value in the accounts of Palandri Limited. The auditors and the Company are reviewing the appropriate accounting treatment. Its effect on the Company's pre-tax profit for the year ended 30 June 2006 is not yet certain nor is the treatment of the disposal in future years. The Company will update shareholders on the impact of this transaction as soon as possible. In the light of this uncertainty, the Company has sought a temporary suspension of dealings in its shares with immediate effect.
Preliminary indications are that operating profit before interest costs, and subject to any adjustments arising from the matters set out in the paragraph above, will be broadly consistent with expectations. However, interest costs have exceeded expectations principally due to a reduction of interest receivable following the sale of the Retention Note in April 2006 and an increase in interest payable due to timing differences between the issue of debentures to raise monies to finance investors loans for the purchases of Managed Investment Scheme units and the actual drawdown of the investor loans and consequent payment of interest by those investors. As a result, and also subject to any adjustments arising from the matters set out in above, operating profit after interest costs will be significantly below market expectations.
