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Colorado Group tells shareholders to take no action on bid
20 Jul '06
4 min read
The Board of Colorado group ltd has advised shareholders to take no action in relation to the current takeover proposal by ARH Investments (Australia) Pty Ltd until the Board has considered the offer in detail and made a formal recommendation to shareholders.
Prior to issuing its formal response, the Board wishes to ensure the market is properly informed in relation to public statements made by ARH and its parent, Affinity Equity Partners.
The Affinity Offer is conditional on, amongst numerous other things, an earnings condition. The condition is that the Colorado Board must confirm that Colorado's earnings before interest and tax (EBIT) for the half year ending 31 July 2006 is not less than $14 million (pre abnormal items).
Colorado's auditors have confirmed the term abnormal items have not been used in Australian accounting standards for over 5 years. It is a nonsense for Affinity to condition its offer in this manner. Such a condition has little or no relevance to any value attributed to Colorado as the company generates the vast majority of its earnings in the second half.
Colorado has since March 2006 consistently maintained that its first half earnings would be flat compared with last year, which was an EBIT of $10.2 million.
The equity analysts' consensus EBIT forecast is consistent with this guidance. This confirms the market has understood the guidance provided. There can be no argument from Affinity that it does not understand the position. It has engaged Eddie MacDonald the previous acting CEO of Colorado as a consultant. It was Eddie MacDonald who first publicly stated the earnings guidance at the time of the release of the 2005/06 financial results in March 2006.
Prior to issuing its formal response, the Board wishes to ensure the market is properly informed in relation to public statements made by ARH and its parent, Affinity Equity Partners.
The Affinity Offer is conditional on, amongst numerous other things, an earnings condition. The condition is that the Colorado Board must confirm that Colorado's earnings before interest and tax (EBIT) for the half year ending 31 July 2006 is not less than $14 million (pre abnormal items).
Colorado's auditors have confirmed the term abnormal items have not been used in Australian accounting standards for over 5 years. It is a nonsense for Affinity to condition its offer in this manner. Such a condition has little or no relevance to any value attributed to Colorado as the company generates the vast majority of its earnings in the second half.
Colorado has since March 2006 consistently maintained that its first half earnings would be flat compared with last year, which was an EBIT of $10.2 million.
The equity analysts' consensus EBIT forecast is consistent with this guidance. This confirms the market has understood the guidance provided. There can be no argument from Affinity that it does not understand the position. It has engaged Eddie MacDonald the previous acting CEO of Colorado as a consultant. It was Eddie MacDonald who first publicly stated the earnings guidance at the time of the release of the 2005/06 financial results in March 2006.
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