19 March 2008

MFS faces snow storm after results delays

A report in The Age says that Victoria ski resort owner MFS Living and Leisure has failed to lodge its half-year results for the second time in less than a month, flaming concerns about its debts and its ability to stay afloat.

The delay was not announced to the market but revealed after the company cancelled a meeting for the second time with BusinessDay to discuss its half-year results.

MFS Living and its parent, MFS Ltd, have been suspended from trading since January. MFS Living has been trying to sell its aquariums and treetop walks businesses in a bid to pay off $180 million in short-term loans by May 30.

Its lucrative Mount Hotham and Falls Creek ski resorts, which account for almost a third of its pre-tax earnings, are also reportedly up for grabs. MFS Living chief executive John Schryver and chairwoman Julanne Shearer were unavailable for comment.

A spokeswoman said the company "was not trying to avoid anything" and was "working as fast as it could to lodge as soon as possible".

Major shareholders including Melbourne's Grollo family were chagrined at the delay to the results and the ongoing suspension of MFS Living's shares.

"We're concerned Ã¢â¬~¦ we're looking forward to seeing the results," said Nick Whitby of the Grollo Group, which has a 5% stake in MFS Living. "Everyone wants to know, particularly in this market, what is going on at this point in time." "We are waiting with interest to see what the results are, where they currently stand and what position the business is in."

Mr Whitby is chief executive of Buller Ski Lifts, a rival Victorian resort business owned by Grollo company Equiset. Asked whether the Grollos had any interest in buying the MFS ski assets, he said the fundamental businesses were "sound" and that the company would be "watching with great interest".

An industry source said if the aquariums and tree-tops walks assets failed to sell, the ski assets could be sold under distressed circumstances. "Ski assets aren't exactly flavour of the month for public companies because of climate change," he said. "But if you're a private company buying from a receiver it could be very attractive."

ASX corporate affairs manager Matthew Gibbs said MFS Living and MFS Ltd were already enduring the penalty for failing to lodge results Ã¢â¬' suspension. He said the ASX was working with both companies on their imminent results release and breaches of continuous disclosure rules were not yet an issue.

Australian Shareholders Association director Ian Curry demanded an explanation for the delay. "Is it because the auditors are not prepared to sign off? Are there financing issues? Lengthy trading halts are not acceptable Ã¢â¬~¦ the longer things go, the worse everyone assumes their position is."

Auditor Timothy Allman of PricewaterhouseCoopers declined to comment.

Mount Hotham and Falls Creek resorts have 26% of the Australian skier market, by number of skier days. MFS bought the company that runs those resorts, Australian Alpine Enterprises, for about $65 million in 2006.

UBS analyst Ray David said in a recent investor report that he believed the company was in a net cash outflow position given first-half 2007-08 capital expenditure had fully drawn down on loan facilities for the extension of Melbourne aquariums and acquisition of tree-tops.

"The second-half, loss-making period of ski resorts is also likely to exacerbate MFS Living's worsening position," Mr David wrote.

A Report by The Mole from The Age