AFF

[Gryffyn]

AFF
25/06/2004
CAPREC

REL: 1137 HRS AFFCO Holdings Limited

CAPREC: AFF: AFFCO's Cash Return of Capital

The Directors of AFFCO Holdings Limited today announced the company's
intention to make a cash return of capital to shareholders of $20 million,
subject to receipt of shareholder and other relevant approvals. This return
of Capital follows significant capital injections by shareholders in the past
two years in addition to realisation of surplus assets and investments which
have been substantial.

AFFCO Chairman, Mr Sam Lewis, said the Directors proposed the return of
capital by way of High Court approved scheme of arrangement involving the pro
rata cancellation of a proportion of AFFCO shares, so that all shareholders
will receive the capital return on a proportionate basis. The company will
be working towards completion of the capital return by its balance date of 30
September, and will advise further details in due course.
End CA:00101832 For:AFF Type:CAPREC Time:2004-06-25:11:37:42

[Gryffyn]

Sorry for new thread but so long since anyone talked about AFFCO that I couldn't be bothered trolling through the old stuff.

Welcome news for those of us who've had these for a while. Things looking up.

Disc: AFF

[Gryffyn]

But wait, there's more...

Jenny Ruth: Affco chief's hard work bearing fruit

25.06.2004
COMMENT
Back in December, it looked as if meat processor Affco Holdings might be up to its old tricks: disappointing shareholders.

At a special meeting it warned that disappointing trading in the first two months of the present financial year made it unlikely the first quarter's results would match the same period last year.

But by April, it was able to reassure shareholders that it had fared a lot better in the second quarter and sufficiently so that the first-half profit would "not materially alter from last season".

In the event, the first-half profit came in 4 per cent stronger at $11.2 million.

That was even after a $2.6 million write-down of intangible assets which chief executive Tony Egan says was goodwill associated with an overseas marketing subsidiary.

That makes three half-years in a row in which Affco has produced positive results.

In the previous five years, it had produced total losses of $63 million.

In 2001, when other meat companies were reporting record profits, Affco had to report a 96 per cent slide to just $574,000 profit.

Its financial position became so dire that in less than a year from late 2001 it had to go to shareholders twice for cash injections.

The first was an $11.25 million rights issue at 25c a share and the second, the following September, a $27 million issue at 10c a share.

Independent adviser Deloitte described the second issue as critical to the company's future.

Not surprisingly, the company hasn't paid a dividend in six years.

Egan says Affco was warning farmers at woolshed meetings last year that "one swallow didn't make a summer".

But although he concedes that being tagged a perennial under-performer was fair comment a couple of years ago, he's hoping the company can shrug off that label through producing more consistent performances.

The market seems to be beginning to share his optimism.

In the past month, the shares have risen from 23c to 31c, an almost 35 per cent increase and their highest level since the second rights issue.

Egan joined Affco as chief operating officer in July 2001.

It was a major step-up from his previous position at single-plant Waikato-based Greenlea Meats - a company owned by his uncle's family - but the Affco position, then involving eight plants, can hardly have looked appealing.

The company had suddenly lost its chief executive, Ross Townshend, the previous February, five days after an upbeat annual meeting.

Chairman Sam Lewis had stepped up to take an executive role until a replacement could be found and proceeded to cut a swathe through the executive ranks.

The 2001 annual report showed 73 employees earning more than $100,000 and by the 2002 report that number was down to 57.

A year later, it had shrunk further to 21.

The cost-cutting extends to Egan's salary. He was appointed chief executive in September 2002 and last year's annual report shows he earns less than half the $870,000 salary Townshend had been paid.

The report shows the most highly paid executive earned between $390,001 and $400,000.

Lewis also reversed Townshend's international strategy, closing down offices in the US and Argentina and a joint venture in China.

With other cost-cutting moves, the company moved its head office out of its eight-floor offices in downtown Auckland to its Horotiu plant at the end of 2002.

Egan says that has proved a good move. "Part of the decision to leave Auckland was to get out of the limelight and spend a lot less on promotional activity for Affco in terms of words and let the actions speak for themselves."

And the company had thought it appropriate to return to its rural roots. He says having all the head office staff together on one floor in an open-plan office has been hugely beneficial.

"A lot of the problems in a company where you move a lot of product to a lot of different destinations are because of lack of communication."

The present