FirsovaRevenues on a like-by-like basis (continuing businesses...

Firsova

Revenues on a like-by-like basis (continuing businesses only) are falling by around $600m pa, based on an analysis of H1 FY13 results. With gross margins of around 20%, this is a loss in annual gross margin of around $120m. The restructuring savings of $12m you refer to goes 10% of the way towards fixing the problem the group is facing.

The total restructuring savings referred to in the half year announcement were $35 to $40m. Please consider the following simple arithmetic:

Underlying loss in 2012 -$27m
Restructuring savings +$40m
Resultant loss for FY13 +$13m proforma like-for-like

Loss of gross margin -$120m
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Likely reported loss FY13 -$107m
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Note - service of hybrid debt would cost about $25m over and above this loss (if it were ever reinstated).

This is why in my view there is going to be a huge reported loss in continuing underlying business in FY13, without either an incredible turnaround of Canute-like proportions in the core paper business, and/or an incredible level of growth in the diversified business (unlikely - see my earlier post), and/or a massive disposal of all of the loss-making businesses (UK, Benelux, Germany - which the company has now said they are not going to do).

On top of this $100m loss, there will be yet more exceptionals (restructuring charges, write-downs and write-offs, redundancies, impairments).

I hope shareholders and hybridholders are ready for another massive loss - whiich the company may well be forced to pre-announce before the end of June.

IMHO - all based on careful reading of the company's reported announcements and published results.