Gale Pacific Chairman's address to general meeting
27 Aug '07
4 min read
The proposed recapitalisation package is the result of a comprehensive process to identify a sustainable long term capital structure for the Company. The Directors and management, assisted by the Company's financial advisors, have determined that the proposed recapitalisation is the best available option.
The proposed funding solution that shareholders are being asked to vote upon will permit the Company to complete the restructuring plan and will also introduce a strategic investment partner with a strong track record in achieving strong shareholder returns.
Your Directors unanimously recommend this proposal to shareholders. To better assist shareholders in their consideration of the proposals, the Directors commissioned Ernst & Young to prepare an Independent Expert's Report to determine whether the proposed share issue to Investec and Thorney is fair and reasonable when considered in the context of the interests of all the shareholders, other than those involved in the proposed share issue or associated with them.
The Independent Expert's Report dated 18 July 2007 was mailed out to all shareholders along with the Notice of this General Meeting.
The Independent Expert's Report concludes that the proposed share issue to IWPE and Thorney is, on balance, fair and reasonable for the other shareholders of the Company. I would also like to update shareholders regarding our financial result for the year to June 2007, and an important accounting decision which has been taken recently.
During the Company's start up and entry into Europe over the past three years, our German subsidiary has incurred tax losses which are available to be carried forward for offset against future profit in Europe, and have been previously classified in the accounts as a “deferred tax asset”.
However, until such time as the European business demonstrates consistent profitability, management, the Directors and the Auditors consider it prudent to write-off the carrying value of this deferred tax asset.
When the European operations generate profits in the future, the ability to recover these tax losses will be an upside to the after tax profit of the Company.
Therefore, the deferred tax asset relating to Gale Europe GmbH of A$3.75 million will be written off at 30 June 2007. The Group consolidated net loss after tax for the year ended 30 June, 2007, will thus increase from the previously advised A$12.6m to A$16.35 million.
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