Jitters lift as Vertex hits target

By PAUL PANCKHURST

Plastics manufacturer Vertex started to claw back some credibility yesterday after the profit warning that shattered its share price 12 weeks ago.

The company came in with a result for the six months to September 30 that was consistent with the revised forecasts of its September 4 warning.

It said it expected to meet the revised full-year forecast for earnings before interest and tax of $10.1 million.

It was also sticking with plans for a fully imputed dividend of 14.2 for the year. The company's interim dividend is 6.1c.

Vertex makes ice cream tubs, industrial containers, foam food trays, and parts for drench guns - among other things.

The market savaged the company after it issued a profit warning only 9 1/2 weeks after its $61 million float.

Its share price fell by 25 per cent to $1.38.

The Securities Commission and the Stock Exchange's market surveillance panel are investigating.

Macquarie Equities senior analyst Arthur Lim said yesterday's result "stabilised the situation" for Vertex in the aftermath of its profit warning.

He said the appointment to the board of the experienced Sandy Maier - best known as the one-time statutory manager of the DFC - was "probably pretty positive".

Maier takes the spot vacated by Doug McKay, newly appointed as chief executive of the Sealord Group.

Forsyth Barr equity analyst John Cairns described yesterday's figures as the first stage in re-establishing the company's credibility.

Vertex reported a net profit after tax of $1.7 million, up 19 per cent on the same period last year.

Earnings before interest and tax were $4.6 million - down 12 per cent on the forecast in the prospectus but in line with the revised figure.

Sales of $41.9 million were down 9 per cent on the prospectus but, likewise, in line with the revised figure.

Vertex has two parts.

The established core of the business makes industrial containers, household containers, dairy food packaging and food trays, and accounts for most revenue.

The newer and smaller side of the business is made up of its two growth prospects - an injection moulding business called Technical Injection and a meat packaging business called Securefresh.

The result shows the core business fell short of the prospectus forecast for sales by 6 per cent, or $2.4 million, and the growth side of Vertex was under by 30 per cent, or $2 million.

That detail helps to clear up some fuzziness, since the profit warning did not refer to the decline in expected revenue for the core business, leaving the impression that the growth side of the business bore all the blame.

Vertex shares closed yesterday at $1.36.