By NZPA
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Friday 14th March 2003 |
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"The offer document emphasised certain business units of Vertex as being the most significant source of potential growth, but did not give sufficient information about risks associated with those business units," commission chairman Jane Diplock said.
However, the commission found no evidence that the directors believed the offer document was misleading, nor that they knew it was at the date of allotment.
Vertex, a maker of plastics containers, surprised investors when it revealed in September last year that its half year earnings would fall short of its prospectus forecast by 15 percent.
It reportedly further surprised South Island businessman George Gould director by making another profit warning shortly after he took a 19.9 percent stake in February.
Vertex's share price plummeted from its listing price of $2.05 to $1.38 in September after downgrading its profit forecast to $10.1 million in expected earnings for the year to March before interest and tax.
In February the company said it expected earnings for the year to March 31 before interest and tax to come in between $9.2 million and $9.6 million, partly due to the strength of the New Zealand dollar.
Shares in Vertex were trading down 4c to $1.45 in a positive mid-morning market today.
Today's Securities Commission report is the second recent blow for Vertex.
Last week the Stock Exchange's independent market surveillance panel found the company had breached listing rules for its first profit warning but no action was taken against the company.
The Stock Exchange later put out a statement saying Vertex deserved to be censured.
The commission said it also encountered a contradiction in financial reporting rules when it examined certain assumptions underlying Vertex's financial information for its growth business units.
It concluded the assumptions Vertex made for two business units were not sufficiently supportable to be presented as forecasts, but that they were for the other business units.
The matter had been referred to the Institute of Chartered Accountants (ICANZ) because the financial reporting standards were not clear on this issue, Ms Diplock said.
"In such cases, businesses should distinguish between those units for which they can forecast, and those for which only projections can be given."
The commission also found deficiencies in the way information about individual business units had been conveyed from Vertex's management to its board.
It also said several Vertex directors lacked understanding about how to present the prospective financial information in offer documents.
"Some directors did not appear to know that prospective financial information can be presented as either a forecast or a projection," the commission said.
Ms Diplock said there was also confusion as to the role of PricewaterhouseCoopers as financial adviser to Vertex, concerning its responsibilities in relation to the prospective financial information.
The prospectus contained no professional guidance for auditors relating to examining prospective financial information.
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