Conclusion Of Amsterdam Exchanges' Investigation: Nyloplast Violated Listing And Issuing Rules

In September 1999 Amsterdam Exchanges started an investigation into Nyloplast's possible violation of section 28h of the Listing and Issuing Rules in connection with turnover and profit forecasts made on 31 March 1999 and the half-yearly figures published on 30 August 1999. This investigation has now been concluded. Since this investigation was started before the Listing and Issuing Rules Advisory Committee was set up, Nyloplast was asked to consent to the case being handled by this new committee. However, Nyloplast was not in favour of this, and the case was therefore dealt with by Amsterdam Exchanges' board of directors. On the basis of the information available, Amsterdam Exchanges concluded that Nyloplast violated section 28 h of the Listing and Issuing Rules. Under this section, issuers must immediately publish all facts or events relevant to them which are likely to have a material effect on their share price. Nyloplast stated that the downturn in results in the first half of 1999 was chiefly due to persistent production problems at Nyloplast Europe B.V. and only came to light after the end of the second quarter owing to the quarterly reporting system used at Nyloplast. However, Amsterdam Exchanges took the view that the negative trend in results could have been identified before then if Nyloplast had had an adequate reporting system that provided management with relevant information at an early stage. In the period up to 30 August, Nyloplast expected that earnings in the second half of 1999 would be an improvement on the same period in 1998 and that therefore the results for the whole of 1999 would be in line with the forecast made on 31 March 1999. However, Amsterdam Exchanges did not believe that this was justifiable, because the fall in profits in the first quarter of 1999 and the frequent discussions about Nyloplast Europe B.V.'s production problems held with the operating companies' management and controllers during the second quarter meant that a substantial fall in operating profits in the course of the second quarter should have easily been foreseen. Given Nyloplast Europe B.V.'s problems, the resulting drop in profits during the first half of the year and the impact of this on Nyloplast's profits, Nyloplast had a responsibility to issue an interim profit warning, particularly in view of the profit forecast made on 31 March 1999. Its failure to do so until 30 August 1999 constituted a violation of section 28h of the Listing and Issuing Rules.