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Dorchester announces structure simplification, dividends

Dorchester has increased its profit guidance and announced it intends to pay dividends for the first time since 2007.

Wednesday, May 1st 2013, 5:07PM

It announced today that it was simplifying its capital structure and planning a share placement.

Combined with the share options on issue, Dorchester expected the moves would boost shareholder funds from $29 million to about $61 million.

The company has 150 million options on issue that convert into ordinary shares at the end of this month if the option holders pay 12.5c per share, less than half the current trading price of 29c.

The options came about in 2010 when Gran Baker’s Business Bakery became involved with a recapitalisation plan and 7200 investors owed about $84 million swap their debenture stock for four different types of security, including the share options.

Chief executive Paul Byrnes said the company would write to the optionholders over the next week to tell them they needed to take advice on whether to exercise the option. But he said they would be strongly urged to exercise or sell their options before May 31, when they would lapse.

Byrnes said: “Despite our utmost efforts, it is likely that some optionholders will not take action and a percentage of the options will lapse. To ensure we receive the full cash injection anticipated we intend to place up to 30 million new shares in total with a mechanism that will limit the total of new shares issued through the exercise of options and the share placement to 150 million shares.”

The company is also proposing an earlier conversion to ordinary shares of the 110 million optional convertible notes, worth $11 million. These had been due for repayment on March 31, 2015.

Byrnes said the proposed move to early July this year would turn $11 million of debt on the balance sheet into equity.

Dorchester had estimated that group profit after tax for the year to the end of March would be about $1.3 million. It now expects it to be about $1.6 million. It expects that to rise to $6 million next year.  Dorchester intends to pay out 40% of its tax-paid profit in dividends to shareholders. The plicy would apply from April 1 this year with the first interim dividend due in December.

Byrnes said the increased profit reflected higher trading profit from the finance, insurance and EC credit arms of the group. “We expect M&A activity to add to these profit forecasts.”

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