Steel & Tube ‘confident of profitability’
Floating homes plan for Coromandel
Despite downgrade, Lower Hutt company expects to see an improvement in 2019
Steel & Tube Holdings says investors can expect a return to profitability in 2019, following a significant downgrade which has seen the stock shed up to a quarter of its value.
Earlier today, the Lower Huttbased business said it expects to post a loss before interest and tax (ebit) of about $38 million this financial year, from a positive ebit of $31.1m a year earlier, and breach its banking covenants after a restructuring that will see it exit its plastics business and write down the value of its assets.
It said normalised ebit would be about $16m, excluding non-trading costs and impairments of up to $54m. On a conference call yesterday, chief executive Mark Malpass said shareholders could “absolutely” expect a return to profitability in the next financial year.
“These are one-time non-trading impacts we’re taking that are associated with legacy issues.”
The $54m in writedowns is comprised of $12m from selling its plastics business, $18m on inventory from its new enterprise resource planning (ERP) system, and $10m on other intangibles.
The company also took a $5.5m impairment on inventory in the first half, and Malpass said $2m came from business changes within its reinforcing division, $1.m from restructuring, and $4m in other oneoffs.
Chief financial officer Greg Smith said the company doesn’t anticipate any equity raising, though it will breach its ebit-to-interest cover ratio, of a minimum of 2.25 times, and possibly another covenant temporar-
These are some significant writedowns for us but we’re moving forward from this point.
ily, and is seeking a waiver from its banking partners.
“These are some significant writedowns for us but we’re moving forward from this point, and the changes we’re making and looking to drive underlying earnings back into the business, we’re not anticipating any equity raise is required,” Smith said. “We’d expect to operate back within our covenant levels on a goforward basis.” New Zealand’s first floating home community is being proposed for the Coromandel but plans for a Gulf Harbour project promoted three years ago are yet to become a reality.
Kerry Martin of Waterside Sustainable Developments of Selwyn St in Onehunga said the business is planning the country’s first floating community at Whitianga Waterways where 12 residences would be priced from $1.6 million and could have up to six bedrooms each.
“I think we have found an ideal partner to deliver the first floating homes community in New Zealand. It will be part of a new marine district at the Whitianga Waterways. This unique location will allow each house to have its own 18m berth, offering the opportunity to step from your house right on to your boat,” Martin told the Herald.
Images showed one and two level homes with wide areas of glass and decks, sunken pools and boats moored alongside the flat-roof residences placed alongside a boardwalk.
But Michael Webb-Speight, who announced plans for Gulf Harbour floating homes three years ago, says no work has yet begun.
“We’re still battling to get building consent. We got resource consent. It very much remains our intention to do this.
“We’re trying to comply with the Building Act as it pertains to a residential dwelling. It’s really hard and very, very complicated,” he said of getting approval for his project, The Boat Sheds.
Those were planned for Fairway Bay in the Whangapara¯oa area and the business is still asking for expressions of interest.
“I’m optimistic I can see something in three to six months. But we’ve been buried in paper and been through mediation process with [the Ministry of Business, Innovation and Employment],” Webb-Speight said.
Martin said his Whitianga Waterways concept was planned for canal areas not yet built.
He said his business is “looking for interested individuals who can envision themselves living in such a floating home in Whitianga, with all the natural wonders of Coromandel at their doorstep.”
Greg Smith