Extract from some FIIG research dated 13/5/2011:"We have spoken...

Extract from some FIIG research dated 13/5/2011:

"We have spoken to the company and a decision on the next distribution won?t be made until reasonably close to the payment date (as normal). At this stage there has been no change to the existing policy and the company re-iterated that the board are aware of the benefits in making the payment. However, this recent announcement undoubtedly increases the probability that distributions on this security will again be suspended.
Some positives from the announcement are that the finance facilities have been extended, and the company is continuing its restructuring program to save costs and better deal with market conditions, though there will be a time lag between this implementation and seeing the impact in the financial performance. This should though lead to an improved performance next financial year.
There is almost certainly going to be an impairment of goodwill for the current financial year. With $303.3m in goodwill at 30 June 2010, continued underperformance of the key businesses suggests there will likely be a significant impairment at the full year result."

and

"After announcing an underlying profit after tax of $8.5m in the first half of the year, this implies a loss in the second half in the range of $15.5m-$22.5m. Our expectations were for an underlying profit of around $15m-$20m for the year, a difference of $22.0m-$34.0m.
While net debt remains low, profitability is obviously a concern. While we weren?t expecting a great result from the company, the further downgrade highlights the poor industry characteristics. Considering that finance costs for the year are expected to be approximately $20.0m, this downgrade indicates the company is barely profitable at an EBIT (earnings before interest and tax) level. The key issue now is how much of this continued poor performance is cyclical and how much structural ? an issue we will address shortly in a more extensive research piece."

Full article available at www.fiig.com.au (free registration required).

I have dipped my toe in the water on these today - they are now priced as if there will be a long suspension of interest payments.