Wellington, New Zealand, April 21, 2006--Feltex has agreed to pay out at least $150,000 after the Stock Exchange ruled the embattled carpet maker had not informed it quickly enough last year about a severe fall in profits, according to the Dominion Press.
NZX's regulatory arm said last night it considered the management of Feltex was in possession of material information that should have been disclosed to the market before an announced profit downgrade by the company on April 1, 2005.
Feltex disputes this and believes it has complied fully with NZX's continuous disclosure rules. It has agreed, without admitting liability, to pay money to NZX's regulatory and disciplinary arms.
The settlement includes $65,000 to the NZX Discipline Fund and an estimated $85,000 to meet NZX legal costs. The final total amount could be higher if costs exceed $85,000.
The announcement came after the sharemarket closed yesterday. Feltex shares were unchanged on 37 cents. The shares were sold to the public for $1.70 each in a June 2004 float.
The April 1, 2005, announcement from Feltex drastically revised profit forecasts made only five weeks earlier. Between $8 million and $9 million was cut from the earlier forecast profit figures. As a result the company's share price plummeted by 46c, or 30 per cent on the day, wiping $69 million off the value of the stock.
NZX's acting head of regulation, Simon McArley, said the settlement reached in the case "achieves the objectives of ensuring ongoing integrity of the market in a timely and cost-effective manner". NZX will be revising its continuous disclosure guidance note on what companies should do when faced with a sharp deterioration in financial performance.
Feltex chairman Tim Saunders said the issue had been "one matter carried over from a very trying year".
The Feltex board had acted promptly to deal with its difficulties, including the appointment of new chief executive Peter Thomas. "The settlement of this matter allows the board and the new management team to close the file and to remain focused on the challenge of restoring value to the company and its shareholders," he said, in a statement issued jointly by NZX and Feltex.
Since the April 1, 2005, announcement, Feltex shareholders have been confronted with a stream of bad news from the company. Last year Feltex fired 281 staff and shut a Melbourne yarn plant as it strived to cut costs. Chief executive Sam Magill had his contract with the company terminated, but stayed on the board till being voted off by shareholders at December's annual meeting. A severance agreement was reached with Mr Magill last month.
In February this year Feltex announced an $11.8 million interim loss.
