Shares in Futuris Corporation have rebounded on news that company chief Les Wozniczka will resign.
Futuris announced this morning that Mr Wozniczka would quit, but would stay on as chief executive and managing director until an international search has found a successor.
The shares rose by 26 cents to $1.23 in late morning trade, but were still below the level before yesterday's bloodbath, when Futuris' stock fell by 36.5 cents, or 27pc, to close at 97 cents, their lowest level in 13 years.
Chairman Stephen Gerlach said in the interim, the board would continue to sell off non-core assets and use the funds to reduce debt.
ABN Amro analyst Belinda Moore said Mr Wozniczka's resignation was not a surprise.
"The market has viewed the change positively with the share price up. Effectively the share price is attributing all of yesterday's downgrade to poor management,'' she said.
"While some of the downgrade may be attributable to management, we note that most of the downgrade has occurred on the back of poor MIS sales that have a flow through impact to future years.
"Therefore we see some of today's share price appreciation as premature.''
Ms Moore said the announcement of a new CEO was a positive, but the share price appreciation was an over-reaction.
"We don't know even know who the new CEO is, and what their strategy will be,'' she said.
"The turnaround of FCL (Futuris) will take a couple of years and is not a given.''
Ms Moore said the balance sheet was stretched, and it would not be easy to sell non-core assets such as Australian Agricultural Company or Air International.
"Forestry (MIS) won't see earnings growth until at least 2009-10 and in the meantime it is a highly capital-hungry business,'' she said.
Ms Moore said financial services - banking and insurance - was now starting to experience a tougher environment, with increasing claims in insurance.
"Margins are being squeezed at the bank, and again won't see much growth until 2009-10,'' she said.
"Precluding asset sales, dividends could be at risk in the short term. If not they will have to be underwritten which would be highly dilutionary."
Ms Moore said one of the upsides catalysts to revive the company had now been achieved.
"We will look to remove some of the discount to our valuation in reaching our price target ($1.07)," she said.
"Key catalysts looking forward include successful execution of asset sales and associated debt reduction. While there is management uncertainty, the company could remain vulnerable to corporate activity."
Futuris said yesterday it would sell non-core or non-performing assets to cope with a 15-20pc lower profit this financial year of $80-85 million, well below the $100 million foreshadowed last month. This in turn is likely to hit profits next financial year.
The company blamed the downgrade on lower forestry managed investment scheme (MIS) sales, likely losses from beef producer AAco and higher interest costs.
Earnings before interest and tax (EBIT) in 2007-08 are expected to meet market expectations of $166-182 million. Earnings from Elders Financial Services and Futuris Automotive are in line with expectations.
Mr Wozniczka said demand for MIS products, with only days until the end of the financial year, were much weaker than last year.
MIS sales of $35-45m were the most likely result, well below the previous year's record of $61.5m.
Mr Wozniczka said MIS sales at the forecast level would produce a 2008-09 profit of $85-95m. EBIT next year would fall within the lower range of market expectations of $178-191m, he said.
Analysts blame the lower MIS sales on depressed equity markets, arguing that lower capital gains mean there is less money available for these investments.
Research manager at Australian Agribusiness Group (AAG), Tim Lee, said there had been a lot of negative publicity about MIS, so there was a lot of confusion in the marketplace.
Fewer products were also on the market due to the Federal Government crackdown on non-forestry MIS products.
Mr Lee said forestry products with a Tax Office product ruling that were followed by managers were still eligible as a tax break for investors.
He said it was impossible to say at this stage what the value of MIS sales would be this year. "It's purely guesswork,'' he said.
MIS sales have grown steadily in the past decade, AAG figures show. In 2000, they were valued at $800 million, but were more subdued for a period due to tax changes, reaching figures of $500 million, $300 million and $345 million before climbing to $645 million.
Then the boom times began, with sales in the past three years respectively $1.0 billion, $1.14 billion and 1.12 billion
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