Right of reply: Paddy Boyle, Vertex Group

Friday 21st June 2002

Your articles on the prospectus for Vertex Group Holdings (NBR, June 14) contain several major errors, which could have been avoided if you had taken the trouble to check statements with the company before publishing.

The articles are wrong in a number of assertions about the presentation of the March 2002 accounts and in alleging a trade sale was unsuccessfully sought for the business before the launch of an initial public offering of shares.

The author of one article has confused earnings before interest and tax (ebit) with profit before tax (PBT). The author of the other article has recalculated ebit on a basis that does not reflect proper accounting practice and is incorrect as a basis for assessing the company's performance.

The articles specifically criticise the company for not showing as extraordinary items in the March 2002 accounts:

a gain of $2.43 million on the sale and leaseback of land and buildings;
$2.15 million due to asset revaluation; and
$2.08 million in restructuring costs.

All these issues were properly disclosed in the notes to the accounts and it would have breached financial reporting standards and the securities regulations to have described any of them as extraordinary items. The company has clearly and fully met the disclosure requirements of the securities regulations in its treatment of the March 2002 accounts in the prospectus.

None of the company's assets have been revalued, as alleged by NBR. The realistic economic life of various assets has been recalculated in line with public company practice and this has changed the depreciation rate applying to these assets.

There is no inconsistency, as alleged, in the way in which restructuring costs are treated in the presentation of the March 2002 and March 2003 accounts in the prospectus. In both years they are taken into account before arriving at a profit figure on an ebit` basis.

The advice to the company, which has been reconfirmed, is that its treatment of the March 2002 figures in the prospectus is completely appropriate and correct, and the directors of Vertex Group Holdings have reconfirmed their confidence in the profit forecasts contained in the prospectus.

Paddy Boyle is managing director of Vertex Group Holdings

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