Feltex pays up to end NZX profit inquiry

Carpet-maker Feltex has agreed to pay the New Zealand Exchange more than $150,000 after the exchange found it failed to warn investors early enough about a profit slide.

Feltex said it did not accept any liability over last year's profit warning, but had agreed to the settlement to end the exchange's inquiry.

But NZX Regulation - the stock exchange's regulatory arm - said it "considered that the management of Feltex was in possession of material information that should have been disclosed to the market prior to the actual announcement made on April 1, 2005".

Feltex will pay the NZX Discipline Fund $150,000 plus some of NZX Regulation's costs.

As a result of the case, NZX Regulation said it would give companies guidelines about when profit warnings should be made to the market in order not to breech stock exchange rules.

On April Fool's Day last year, Feltex told the market its full-year profit would be about a third lower than the prospectus forecast.

There had been no indication of the lower profits at a briefing to analysts the month before. Ensuing profit downgrades saw Feltex shares - issued at $1.70 each in June the year before - slide as low as 35c, and cost chief executive Sam Magill his job.

Feltex closed unchanged at 37c yesterday.

Its chairman, Tim Saunders, said yesterday: "The board is concerned to avoid the distractions of a lengthy inquiry and the considerable costs that would be incurred in such an inquiry by Feltex.

"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."

Saunders said Feltex executives, headed by chief executive Peter Thomas, had a new reporting structure to the board and the board had full confidence in the management team.

NZX acting head of regulation Simon McArley said: "The settlement reached in this case achieves the objectives of ensuring ongoing integrity of the market in a timely and cost-effective manner.

"NZX Regulation recognises that a lengthy and costly disciplinary process may not serve the best interests of the New Zealand capital market when the matter is capable of being resolved by settlement."