Small Cap Monitor:

Fisher And Paykel Lifts Revenue By 2%
February 18th. 2008 - Australasian Investment Review – (AIR)

Home appliances business, Fisher & Paykel (FPA) provided a ten-month market update on Monday, most notably a 2.2% increase in revenue, but says margins continue to be under pressure.

The company also said that despite volatile global economic conditions, it was strongly placed to take advantage of any upturn in its major markets when they occur.

The group delivered favourable results in the ten months ending 31 January 2008, with all of its international businesses ending in the positive except for the North American market.

The North American market slumped 2.1% following the unfavourable market conditions there, although this is still better than the industry average.

New Zealand sales revenue increased 2.9% to XX driven by higher average selling prices and an increase in market share.

The Australian market reported an increase of 17.2% in sales revenue on the previous period.

“Overall, the Fisher & Paykel brand in Australia has continued to gain market share in the past 10 months,” the company said.

However, the company said the continuing strength in both NZD and AUD continues to favour other importers considerably in both markets.

Fisher and Paykel is in the process of constructing a factory in Thailand. Construction and recruitment of staff is on schedule and on budget, the company said.

In regard to its finance business, FPA said it has received indicative bids and begun due diligence on the finance business after announcing last November that it was under review.

The New Zealand based company has a market capitalisation of about AUD$669 million and is listed on the Australian Stock Exchange and New Zealand Stock Exchange.

FPA shares rose 5 cents or 2.2%, ending a three-day streak of losses.

Bendigo Bank Announced $72m Profit.

The newly merged regional banks, Bendigo Bank and Adelaide Bank (BEN) reported a 34% increase in net profit to $72.8 million in its half year results today.

That compares with a net profit of $54.3 million dollars in the previous corresponding period.

The results include six months of Bendigo Bank accounts and one month of Adelaide Bank as the merger was announced in November 2007.

The company said while the result incorporates just one month of contribution from Adelaide Bank, the rationale and strategic intent behind the merger remains sound.

Adelaide Bank had one of the bigger margin lending books in the country and was a major founder of plain label mortgages from independent brokers and originators.

It was starting to feel the pain from the credit crunch when the merger happened late last year.

Bendigo Bank managing director Rob Hunt said the result demonstrated the bank’s ability to achieve solid growth at profitable prices despite current market conditions.

“The global financial services sector is experiencing a period of significant volatility and reduced confidence, with funding more difficult and more expensive to obtain,” Hunt said.

“In that environment, we have demonstrated a commitment to write quality credit in reasonable volumes and at profitable prices – and that remains the focus of the merged group.

“We have a proven retail banking capacity, strong liquidity and adequate funding which we are directing towards business that improves profitability, enhances customer relationships and improves our long-term prospects.

“So our strategy has not changed, just the market conditions in which we find ourselves.”

The bank said the merging of Adelaide Bank and Bendigo Bank continues, with work teams formed to implement the merger process.

The new name “Bendigo and Adelaide Bank Limited” will come into effect from March 31, 2008.

In regard to the full year outlook, the company said it was sound and focused on further improved shareholder returns.

Shares in Bendigo Bank (BEN) rose 1% to $11…

Austin Engineering Ups The Ante.

In a sea of missed forecasts and foregone expectations this interim reporting season, it’s rare to find a company whose results have exceeded market expectations.

Shares in engineering firm Austin Engineering rose by 6.8% to $2.80 on Monday after the company announced a record result for the six months ended 31 December 2007.

Austin said its revenue has nearly doubled – it hit $43.2 million, from the previous $29.3 million the previous corresponding period.

In addition, the net profit of $4.7 million represented a 100% increase from the corresponding period a year ago.

The Brisbane-based firm also provided favourable outlook for the foreseeable future - both for new projects and ‘repair and replace’ work.

It said it is focusing on both short- and long-term opportunities for revenue growth.

“We expect to report strong increases in all the company’s key financial measure for the full-year,’ Chairman Peter Fitch said.

Austin said the current result was driven by improved performance across all businesses, and ‘supported by high levels of industry activity and demand for Austin’s JEC product range of dump truck bodies, excavator buckets and machining and steel fabrication services’.

“High demand for the company’s products and constant improvements in productivity have created a stable earnings base and allowed Austin to deliver on its forecasts to the market,” Fitch said.

ANG provides engineering services to the mining, oil and gas industries. It specialises in the supply and installation of metal products such as structural steel and piping, as well as products used in the resources industry such as dump truck bodies, excavator buckets and large service vehicles. Its operations are concentrated in Queensland and Western Australia.

ANZ Slumps On Debt Fears.

Shares in ANZ Banking Group (ANZ) plummeted by more than 5% to a 2.5 year low today, dragging other banks’ shares down with it, after announcing that rising credit costs and a provision for a soaring insurance investment would slow profit growth for this year.

The shares slid 5% to $22.70 at 11:28AM AEST, their lowest since September 2005. They’ve slumped 17 percent this year.

The bank issued a trading update this morning that revealed a one-off $220.68 million provision to cover any potential loss from an exposure to a US-based monoline insurer.

In the update the bank said its full year profit before provisions was on track to exceed last year’s increase of 11%. However, that growth was expected to be offset by higher provisions associated with the changing global credit environment.

ANZ CEO Michael Smith described the global debt market as “a financial services bloodbath’.

“Credit costs are going up, well above underlying earnings growth.”

ANZ remained hopeful, saying a “substantial” portion of the $200 million provision may be written back in the future.

But adding to its provisional pain was a rating downgrade for one of the bank’s commercial property clients, resulting in an extra $90 million charge to the lender’s collective provision.

While this property client was unnamed, speculation is that it could be the troubled Centro Properties Group. UBS today estimated that ANZ had a $500 million unsecured exposure to Centro, a $700 million secured exposure and a $150 million exposure to US-based lender Countrywide.

ANZ has also pencilled in another $51 million one-off provision to cover the failure of a resources client, also unidentified.

Shares in ANZ closed down by $1.46 or 6.1% to finish at $22.45.

This article is contributed by Australasian Investment Review – (AIR) You can subscribe for their free newsletter at

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