Trilogy warns annual earnings could fall 10% below guidance

Trilogy International [NZX:TIL] says its annual earnings may fall up to 10% short of official guidance as shareholders prepare to vote on a $211 million takeover offer on Wednesday.

In a statement, the skincare and fragrance company attributed the forecast to an unstable quarter for its Ecoya scented candles and uncertainty as to the timing of some Lanocorp beauty products orders.

"TIL notes trading in the past three months has been relatively volatile, with Ecoya brand sales lower than expected.

"In addition, there are orders for both Trilogy and Lanocorp that may or may not close around balance date.

"These factors could negatively impact 2018 financial year earnings by up to 10%."

The company said guidance for earnings before interest, tax, depreciation and amortisation (ebitda) would be $20 million in the year ending March 31.

A Grant Samuel report said Ecoya was tracking below its 2017 sales due to a soy wax shortage.

Special meeting
At its special meeting on Wednesday, TIL shareholders will decide on whether to accept a $211 million takeover by Citic Capital China Partners.

Citic Capital’s $2.90 a share offer fell within independent adviser Grant Samuel's valuation range of between $2.59-2.94 a share.

The offer price values Trilogy at approximately $250 million on a total enterprise valuation.

However, the offer was much lower than Trilogy’s peak share price of $4.90 in August 2016 when investors were bouyed by the company’s rapid skincare product growth.

The Business Bakery, which is Trilogy’s largest shareholder, intends to vote its 31.2% in favour of the takeover.

Citic Capital's offer is via a ‘scheme,’ rather than a formal takeover offer, meaning it needs to obtain approval from 75% of shareholders at the meeting and at least 50% of total voting rights cast.

The transaction also needs to be approved by the High Court and requires Overseas Investment Office approval.

Trilogy chairman Grant Baker has said the scheme proposal provides certainty for the value of the shares.

“The board remains confident that TIL is well positioned to deliver growth in earnings across each of its four businesses in the long term.

“Delivering this growth will take time and involves execution risks. Therefore, shareholders may find attractive the opportunity to realise the value of their TIL shares in cash now.

"Citic Capital is viewed as a good owner of TIL as it moves into its next phase of growth. In particular, Citic Capital's strong relationships in the Asian and US markets provide an opportunity to unlock the potential of these brands, and achieve faster growth globally.”

TIL shares closed at $2.84, and have increased 0.4% so far this year.

Additional reporting by BusinessDesk