No Impairment Issue in NZ Shares Trading, KPMG Says

Michelle Remo, “Big 4″ observer
July 18, 2011 /

There is no indication of impairment issue with regards to the accounts of New Zealand shares trading (NZX), a KPMG review stated today, answering recent speculations.

The review disqualified factors pointing to impairment issues that should be signaled in NZX’s accounts”, despite expectations for NZX’s Australian Clear grain exchange (CGX) to achieve earnings worth between $1.5 million and $1.8 million against the $2 million and $2.5 million previous profit in this financial year.

The review will report on CGX’s carrying value for the first half of 2011. It was conducted by accounting firm KPMG over 10 days, starting July 8.

NZX shares fell to $2.27, 1.3 percent lower than the previous. PGG Wrightson topped the list of decliners, while Australia & New Zealand Banking Group rose. On Wall Street, S&P index closed at 1,316.14 intraday in New York, an all-time low in five weeks reflecting US politicians’ failure to lift the government’s borrowing limit ahead of the August 2 deadline.

Meanwhile, the New Zealand shares trading said in a statement that the value of CGX did not change even after an urgent valuation exercise, adding that its expected profitability loss this year is “not material.”

The board statement came out today following the Financial Markets Authority’s (FMA) announcement last week that it had questioned NZX about its disclosures relating to CGX. The FMA oversees the markets regulated by the NZX in terms of its adherence to continuous disclosure rules relating to “material” corporate events.

Last week, reports highlighted discrepancies between NZX market disclosures and statements made by Mark Weldon, the company’s chief executive.

NZX filed proceedings against founders of CGX in Melbourne court over its A$6.4 million purchase of CGX. The filings claimed “breach of warranty and related claims” and tagged CGX co-founders Grant Thomas and Dominic Pym and their companies Ralec Commodities Pty. and Ralec Interactive in the suit.

“The amount in dispute was not, and is not, considered material, consistent with the treatment ofn similar amounts in this business line, and others, over previous financial periods,” the NZX board said in the statement.

Weldon was quoted as saying in court testimony that CGX was operating at a “substantial economic loss”, in contrast to its annual report published in March that said Clear was “demonstrating real momentum, with trading currently tracking at four times the levels reached in the previous harvest.”

However, NZX argued the reference to economic loss was meant to refer to the 2009 and 2010 for CGX alone rather than to the entire New Zealand shares trading.

CGX represented 3 percent of NZX group revenues today from 1.7 percent in 2010, while its carrying value represented “less than 3% of NZX’s current market capitalisation.”

“As such, CGX is not yet a major business within the NZX group portfolio,” according to the NZX board statement.

In addition, NZX said Weldon’s statements “were both historically accurate and not material in the context of the NZX group as a whole” in addition to being specific to two previous calendar years and limited to the CGX business alone.

“They were not intended to refer, as has been implied, to either the current or prospective performance of CGX, or the NZX Group,” the New Zealand shares trading added.


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