By Jenny Ruth
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Wednesday 22nd July 2009 |
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Juice company Charlie's Group will need continuing major shareholder bank guarantees and/or additional equity to underwrite further trading losses as the company had already breached some bank covenants by December 31, 2008, says Selwyn Blinkhorne at ABN Amro Craigs.
The 3.7 million staff and director options exercised this month, which raised $370,000, provided "very modest relief," Blinkhorne says.
Charlie's has warned it now expects to report a net loss between $1.8 million and $1.95 million for the year ended June 30. Blinkhorne had been expecting a $1.4 million net loss.
The company says the profit downgrade reflects higher raw materials and operating costs as well as New Zealand market discounting. Its New Zealand sales are down 2% for the year and Australian sales up 31%. Second-half Australian sales rose 35.3% and accounted for 15% of group sales.
Blinkhorne is forecasting net debt at June 30 was $6 million, or 41.3% of equity. He is assuming the major shareholders will continue to support it and values the shares at 9 cents, below the 10 cent exercise price of the options.
"The key risks to our target price, both upside and downside, are the strength of demand in Charlie's markets, continuing strong market share growth in Australia and ongoing major shareholder support of the company's debt position."
BROKER CALL: ABN Amro Craigs rate Charlie's Group (NZX: CHA ) as hold.
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