Brocker trading again but bad times not over

By PETER GRIFFIN it writer

Troubled IT company Brocker Technology's hopes for a clean start to the financial year are fading.

Brocker shares finally resumed trading on the Nasdaq on Friday as PricewaterhouseCoopers delivered its review of the group's accounts, finding that financial discrepancies were not as extensive as thought.

But Brocker's accounting woes and the announcement of restructuring that will cost 160 jobs combined to shave a further 30 per cent off the share value.

The company's shares closed at 34USc on turnover of 42,700 shares, 14c down from the previous close of 48c on February 15, when news of the investigation reached the market and trading was suspended.

The further drop in value makes Brocker's position on the Nasdaq look all the more uncertain.

Communications manager Nigel Murphy said a dip in the share price when trading resumed was expected as dissatisfied investors moved to wash their hands of Brocker shares.

Some investors may have decided to get out, but what matters is what happens in the next few weeks now that the bad news is out of the way.

Brocker's chief executive officer, Richard Justice, had indicated that the need to go ahead with a one-for-four share consolidation (or reverse split) would depend on how Brocker shares performed when trading resumed.

It now looks as if a share reversal is the only card Brocker has left to play, but with shares dipping as low as 25USc on Friday, even the share split may not be sufficient to maintain a listing.

Brocker shareholders will vote on the share consolidation at a meeting scheduled for April 11.

Mr Murphy said delisting would not be the end of the world with the company maintaining a presence on the Toronto exchange, but the company had gone to great effort and expense to list on the Nasdaq.

Brocker is still within the 90-day limit to move its share price above the all-important $US1 mark because the three-week period when share trading was suspended has not been included in the Nasdaq's timescale.

A Nasdaq spokesperson could not comment on Brocker's particular case but said market delistings were relatively common at the moment because of the Nasdaq's slump.

Still, Brocker management found some comfort in the PricewaterhouseCoopers review, which confirmed that the accounting irregularities, consisting primarily of false invoices and improper capitalisation of expenditures, were confined to the Australian operations and were less extensive than originally believed.

Brocker vice-chairman Michael Ridgway travelled to Australia to oversee operations while the review was carried out, but has since returned to Auckland.

It turns out revenues for the first and second quarters to the six months ending September 30, 2000, were overstated by $C2 million, rather than the $C4.5 million originally thought.

Combined revenue for Brocker's first and second quarters (six months ended September 30, 2000), originally reported as $C55 million, was over-stated by $C2 million.

The net loss before income tax provision for these two combined quarters, reported as $C1.2 million, was understated by $C214,000.

Brocker is still in the process of severing its ties with vendors locally and is in discussions with potential buyers of some of its business units. Problems in the fiercely competitive computer distribution market began for Brocker when the company lost its sole distributor status with some major computer manufacturers.

Brocker's disappointing return to trading came as sales and earnings forecasts from a number of major technology players helped to push the Nasdaq into its sixth straight weekly loss.

Friday's one-year anniversary of the Nasdaq's record high of 5048.62 saw the index down 59 per cent to 2052.78.