NZX defends grain exchange valuation

Sharemarket operator NZX says it will not take an impairment charge on its Clear grain exchange subsidiary despite its performance being linked to litigation against the former owners.

NZX said it came to the conclusion based on an external audit by KPMG, which had spent the past ten days assessing the value of Clear.

“KPMG have reported to the Audit Committee that in their view there are no factors indicating that there is an impairment issue that should be signaled in NZX’s accounts,” NZX said in a statement today.

In its latest annual report NZX carried the grain exchange on its book at $7.8 million.

Questions over the value of Clear were sparked by comments made in May by NZX chief executive Mark Weldon at an employment Court hearing in Melbourne resulting in NZX paying Clear founder Grant Thomas $A259,705 plus interest and costs.

At the hearing Mr Weldon said Clear had not been performing and would report a “substantial economic loss”.

NBR reported Friday that the Financial Markets Authority (formerly the Securities Commission) was looking into the matter, and had asked questions relating to NZX’s continuous disclosure.

In its statement NZX said Mr Weldon’s reference to Clear making a substantial loss was “intended, in context,” to refer to periods ending December, 31 2009 and December 31, 2010.

The comments "were not intended to refer, as has been implied, to either the current or prospective performance of Clear, or the NZX Group.”

NZX said “specific reference” to the employment-related litigation with Mr Thomas was disclosed as a continient liability in its 2010 financial statements.

The amount, which was capped at $A400,000, was not considered material, NZX said.

NZX purchased the Clear Grain Exchange in 2009, paying an upfront sum of $A7 million.

The legal action against the former owners includes allegations of a breach of warranty. NZX is disputing additional payments relating to the sale and purchase agreement.

Mr Thomas has said he is owed up to $A17 million in “earn out” payments.

Meanwhile, NZX confirmed a recent share sale by Mr Weldon was approved by the board.

“The board confirms, including based on the information in this release, that NZX has been and remains in compliance with its continuous disclosure obligations, including at the time Mr Weldon received consent to trade and placed an order to sell shares in NZX Limited.”

NZX shares fell 3c to $2.27 in morning trading.