Perth-based automotive, construction and engineering firm aiLimited has announced it expects to break even in the second half, with tough trading conditions in its automotive business being to blame for the fall in profits.
Perth-based automotive, construction and engineering firm aiLimited has announced it expects to break even in the second half, with tough trading conditions in its automotive business being to blame for the fall in profits.
The company said it expects second half earnings to break even, resulting in an annual profit of $3.4 million.
The company made a net profit of $4.3 million in 2005-06.
Managing director Tony Dale said in an announcement a break-even profit for the second half is "the best that will be achieved", citing an automotive manufacturing industry "experiencing difficult times with the decline in sales of locally built cars".
But the company is looking to acquisitions to create greater economies of scale, Mr Dale said.
"The board is hopeful of announcing finalisation of some of these acquisitions over the next few months," he said.
Meanwhile, aiLimited will seek shareholder approval for the demerger of its construction assets at a general meeting to be held on May 25.
If shareholders approve the demerger, the construction business will apply for its own listing by June.
"Looking to the 2008 financial year and beyond the directors believe the demerger will provide greater clarity and value for shareholders," Mr Dale said.
"Both the automotive and construction businesses have viable long-term development strategies.
"(A demerger means) the respective boards and management teams of the businesses will be able to pursue these strategies without being distracted by consideration of the other's business activities."
In a separate announcement, aiLimited announced the resignation of Peter Hutchinson from the company board, effective April 30.
The company has proposed Mr Hutchinson, who had been a company director since 2001, head the construction division should it win approval for the demerger in a shareholder meeting.
A replacement will be appointed by the end of the month.
The full text of a company announcement is pasted below
At the release of the company's first half results in late February shareholders were made aware of a plan to demerge the construction assets from aiLimited. In mid March the company advised of concerns regarding the immediate earnings outlook for the automotive division. The board now wishes to further update shareholders on both matters.
Documentation for the general meeting to consider the proposed demerger is attached. This will be mailed to shareholders in the next few days. A shareholders meeting to approve the demerger will be held on the 25th of May 2007 paving the way for the construction business to apply for its own listing by June 2007.
The attached documentation contains information on all matters to be considered at the shareholders meeting. Changes to options, previously approved by shareholders, as well as new options proposed to be issued to the construction entity's Managing Director will require shareholder approval. Shareholders will also be asked to support a 1 for 3 consolidation of capital for aiLimited. The directors' view is that whilst it is unlikely to make any difference to the market capitalisation of the company a consolidation will assist with capital market perception once the construction assets have been demerged.
The Notice of Meeting also refers to Mr Peter Hutchinson's resignation from the board effective from the 30th April 2007. A replacement director will be appointed before the end of April.
The board also wishes to advise that trading conditions for the company's automotive operations continue to be difficult. As a result directors believe a break even profit for the second half is the best that will be achieved, resulting in a full year profit of $3.4m for the automotive division. As detailed in recent announcements the automotive manufacturing industry is experiencing challenging times with the decline in sales of locally built cars. All manufacturers are looking towards export markets to boost sales. Toyota and Holden in particular have achieved success in this area with industry sales projected to increase over the next financial year with increased production volumes to benefit aiAutomotive.
The company has a clear strategy of playing a central role in consolidation of the industry by acquisition of other component manufacturers. This will enable economies to be realised by the sharing of overheads. aiAutomotive has been engaged in discussions for a long time with a number of other manufacturers regarding acquiring their businesses. The board is hopeful of announcing finalisation of some of these acquisitions over the next few months.
Looking to the 2008 financial year and beyond the directors believe the demerger will provide greater clarity and value for shareholders. Both the automotive and construction businesses have viable long term development strategies. The respective boards and management teams of these businesses will be able to pursue these strategies without being distracted by consideration of the
other's business activities.
