Feltex defends market showing

By GEORGINA BOND


Feltex Carpets yesterday defended its dismal performance since its June sharemarket listing.

Shares in the company - the largest carpet maker in Australia and New Zealand - closed down 2c at $1.56 last night, continuing the glide from the $1.70 issue price in June.

The latest fall came as Feltex revealed a 15 per cent increase in first-quarter earnings and reiterated its expectations of a stable carpet market over the next year.

Feltex raised $243 million in a public offer in May - the biggest float in this country since Contact Energy was listed five years ago.

Shares traded at an 8c discount at $1.62 on the first day of trading, and they have continued to drop, 7.6 per cent from their initial issue price.

Chairman Tim Saunders told the group's annual meeting yesterday that directors were disappointed with the share price fall and working hard to reverse it.

The effect of the strong New Zealand dollar against the Australian dollar had hit the stock.

"The board thinks the current share price doesn't reflect the inherent value of the company," he said.

The first-quarter net profit of $4.5 million matched the company's forecasts, he said.

Operating profit rose to $10.2 million in the three months to September, up from $8.9 million the previous year, as the company benefited from a focus on selling higher-value carpets.

Chief executive Sam Magill told shareholders any further appreciation of the New Zealand dollar against the Australian would adversely affect full-year profits.

Provided this didn't happen, profit from other initiatives should allow the company to double last year's $11.2 million full-year profit to $23.9 million in the year to June.

Magill said the board had accelerated its approval of a $9.1 million acquisition of new tufting equipment to be installed next year, but earnings contribution from this investment would not be fully realised until the 2006 financial year.

This, combined with the $4.8 million buy of its Foxton manufacturing site in June, meant debt levels at the end of the next financial year would exceed projections by about $10 million, although the Foxton site was expected to make a strong contribution to revenue that year, he said.

Continued growth in the commercial market would offset an expected cooling in the residential market.

Magill said Feltex's focus in the residential market was on renovation and refurbishment, which were less affected by building cycles.