CPI is anticipating a return to a slight profit this year, in his statement to the ASX managing director Bernard Cassell said that despite the market volume decline continuing through the second half of the 2009, there are signs emerging that it has now stabilised. The company estimates it will reap a net profit of $1m for the full year 2010 compared to a loss of $2.1m the year before.
Most of CPI’s exposure to failed companies was insured, but not all. Principal among these was its deal with Paul Canty’s now defunct Quality Print Group, which went down owing CPI more than $3m.
CPI did have a second mortgage on the Canty family home, but is unsure at this stage if it will see any monies from the sale. The house was auctioned off last month for $4.8m after being listed nearer $7m, the first mortgagor is reportedly owed $2.4m, and secured creditor NAB is owed $4.5m. CPI is still waiting to hear if it will receive any cash from the house sale, which has not yet completed.
In a statement to the ASX the company says, “CPI understands that the house recently sold for $4.8m but that the sale has not settled. Provisions have been allocated for the amount of $1m. Whilst CPI intends to take appropriate steps to seek recovery of amounts owing to it under the second mortgage, it is also seeking clarification of the first mortgage position in order to determine the recovery that might be expected. If the amount of the first mortgage debt exceeds the amount advised by the Mortgagor, additional provisioning will be required to that extent.”
Cassell says trading conditions throughout the year have remained difficult and very patchy. In response CPI has continued to maintain a strong focus on cost control. Cassell added that recurring costs for the year will be 14 per cent below the 2009 financial year.
He says, “The Group has generated strong operating cash flows during the year, due to its focus on working capital management. Working capital management was made more difficult during the year due to the very slow sales months of January, February and April.
“These months are always expected to be slower, however actual demand fell well short of the lower sales estimate that had been used as the basis for stock management. The Group has responded to these slow months by restricting ordering and further range rationalisation, the benefits of which are expected to be realised in the coming 6 months.”
Based on its unaudited management accounts for the 11 months to 31 May 2010 and an estimated result for the month of June, CPI expects to report an EBITDA in the region of $7.6m for the 2010 financial year, compared with $7.3m in 2009.
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