Feltex did not breach law, but probe continues

Feltex did not breach securities law with its 2004 float prospectus, but an investigation of the troubled carpet-maker would continue, the Securities Commission said yesterday.

The investigation involved Feltex's disclosure of projected and historical financial information, directors' and vendor's interests and any breach of banking covenants.

"The commission has found no breaches of the securities laws in the prospectus," it said. "No further action will be taken in regard to this matter."

However, the commission said it would continue to investigate continuous disclosure and financial reporting issues for the period subsequent to an earnings downgrade announcement on April 1, 2005.

In April and June last year, Feltex slashed that year's net profit forecast to between $11.5 million and $12 million, having said in February the company was on track to meet the forecast of $23.9 million in the prospectus.

Feltex shares closed up 0.4c yesterday to 11.5c.

In relation to the prospectus, the commission considered whether the financial projections were consistent with the assumptions presented, whether these assumptions were consistent with accounting standards and whether they and other information properly reflected the risks involved.

"The commission concluded that the prospectus was not misleading and the assumptions met the standard of reasonableness required in respect of projections by [accounting standard] FRS-29."

Feltex did not breach disclosure obligations in relation to either the interests of the company's directors or the vendor - Credit Suisse First Boston Asian Merchant Partners.

There was no evidence of a breach of banking covenants by Feltex and, therefore, no related issue with disclosure.

Craig and Graeme Turner - part of the family behind the Sleepyhead bedding group - who are looking to keep Feltex listed, have yet to complete due diligence on the company.