Maggie Beer-owner Longtable undertakes a share consolidation of 25 to one
The company which owns a 48 per cent stake in the battling Maggie Beer Products gourmet foods business has undertaken a big share consolidation to escape from the ranks of the penny dreadful stocks with billions of shares on issue.
The 25 to one share consolidation is part of the re-making of the company now known as Longtable Group as new chief executive Laura McBain attempts to build a premium food group using the Maggie Beer business and organic dairy group B.-d Farm Paris Creek as the foundations.
Longtable chairman Tony Robinson said the company took into account the "quirky" psychology of the sharemarket and the reluctance of some retail investors to buy into stocks worth a few cents. The value of the company is still the same. "It's hard to get some retail people interested in a stock when it trades at those levels, as silly as that sounds".
"It's the emotional issues that drive some people to steer away from those few pennies. It's just a quirky part of the psychology of the market," Mr Robinson said on Thursday.
Longtable had 2.43 billion shares on issue but that has been cut by 96 per cent to 97 million shares. The company's shares are now trading around the 85¢ mark instead of 3.4¢.
Unlisted options have been consolidated by a similar amount and the exercise price has been increased by a factor of 25. It means that a package of options granted to Ms McBain, a former chief executive of infant formula high-flyer Bellamy's Australia who departed from Bellamy's in tumultuous circumstances, have also been adjusted and now have an exercise price of 50¢.
But the spotlight is on the flagging performance of the Maggie Beer Products business which suffered a loss of $251,000 in the first half of 2017-18 as a rollout into IGA stores operated by Metcash went slower than planned, and higher spending on promotions shredded margins.
The Maggie Beer Products operations make a range of ice-creams, pate, quince pastes, sauces and pate and also suffered a painful slide into the red in the previous full financial year, posting an annual loss of $2.13 million for the 12 months ended June 30, 2017.
Longtable bought Australia's largest biodynamic and organic dairy business, B.-d Farm Paris Creek, in late 2017 for about $34 million. It aims to lift manufacturing capacity from 12 million litres per annum to 30 million litres and bolster sales in the eastern states of Australia.
The Maggie Beer Products business was built up over decades by Maggie Beer, who has a national profile through a string of cookbooks, television shows and as a frequent guest judge of the Ten Network's MasterChef series.
Longtable was previously known as Primary Opinion until a name change in late 2017. It paid $15 million for a 48 per cent stake in Maggie Beer Products in mid-2016, as it transformed from its previous business of running a networking community in legal services, human resources and accounting.
Mr Robinson also said that having so many shares on issue previously was a handicap in managing the share base and for any future capital raisings should they be required to fund acquisitions.
"It was a nonsense amount."
Agribusiness group Elders completed a 10 to one share consolidation in 2015 as part of its reinvigoration under chief executive Mark Allison, using similar arguments where it was tired of the volatility which came with a low share price and too many shares on issue.
At the other end of the spectrum, market heavyweights such as Macquarie, which trades at $105, and CSL, at $160, are regularly pinpointed as possible candidates for a share split to cut the face value of their shares as retail investors baulk, even though the value of the company doesn't change.
