Investors have welcomed Brambles’ decision to separate its underperforming paper management business Recall from the rest of the company.
Recall could have its own listing on the Australian share market by early 2014 under plans announced by Brambles on Tuesday, 12 months since it failed to sell company that handles the management and storage of documents and records.
Recall’s earnings and profit are expected to have fallen in the 2012/13 financial year, but Brambles chief executive Tom Gorman said the company had strong prospects.
The demerger will allow Brambles to concentrate on growing its pooling solutions business, he said, which provides reusable CHEP and IFCO pallets, crates and containers to industry.
“Demerging Recall is a strategic decision,” Mr Gorman told reporters on Tuesday.
“The pooling business, we believe, has higher growth potential and long-term, higher return on capital opportunities … and it would be the wrong thing to keep Recall in that environment.”
Brambles shares gained as much as 3.8 per cent after the announcement, and closed 27 cents higher, up three per cent, at $9.35.
Mr Gorman said Recall would be “crowded out” if it stayed under Brambles management.
He also saw a future for documents-based data management.
“The so-called digital threat that folks have talked about is not evident,” Mr Gorman said, adding the public sector, law firms, financial services and medical specialists needed more paper products.
But Brambles has flagged further falls in Recall’s profit for the 2012/13 financial year.
Underlying profit is expected to be between $US138 million and $US142 million, down from an underlying profit of $US174 million in the previous financial year.
Under the demerger plans, Brambles shareholders will receive new shares in Recall, proportionate to their existing Brambles shareholding, while retaining their existing Brambles shares.
They are expected to vote on the split in December, and if approved the independent listing of Recall will occur soon after.
Brambles will not retain any shareholding in Recall after the demerger.
Doug Pertz will remain as Recall chief executive, and gaming company Aristocrat Leisure’s chairman Ian Blackburne will be its chairman once spun-off from Brambles.
Brambles said it still expects to post an underlying profit of between $US1.03 billion and $US1.06 billion for the 2012/13 financial year, up from $US1.01 billion in the previous year.
