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Eastern Bay of Plenty lines company Horizon Energy has cut its annual profit forecast by $2.9 million on its exposure to the collapse of Mainzeal Property and Construction, just four days after trimming its guidance.
The Whakatane-based company expects net profit of $500,000 in the year ending March 31, down from an earlier forecast of $3.4 million. Horizon is owed $4 million through Aquaheat as a sub-contractor to Mainzeal, arising from retentions on past and current contracts.
"This quantum of the loss suffered by Aquaheat is extremely disappointing and the government and relevant legislative bodies need to revisit the Construction Contracts Act to afford more protection to subcontractors," chairman Rob Tait says.
"It is both fair and morally right for subcontractors to have a right to recover their share of unpaid work directly from the client in such cases where the client has not paid Mainzeal."
Horizon foreshadowed the downgrade, saying it is exposed to Mainzeal's collapse, though it had not quantified that when cutting guidance on increased transmission costs – a provision made for a Commerce Commission required price decision – expected losses from its Aquaheat subsidiary and acquisition costs relating to the purchase.
The company has also warned any mark to market changes in the value of its interest rate swap portfolio between this month and the end of the financial year may impact on the forecast.
The infrequently traded shares advanced 1.2 percent to $3.40 and have increased 3 percent this year.