Australia's third largest ISP iiNet yesterday advised the Australian Stock Exchange that its financial performance in the March quarter has been well below expectations, according to chief financial officer and company secretary Stephen Fewster.
However, its wholly-owned New Zealand ISP subsidiary, Ihug is performing better than expected, say both iiNet chief executive Michael Malone and Ihug CEO Mark Rushworth. iiNet hopes that the better-performing Ihug will help cast the parent company in positive light, but the halt on share trading continue for now.
Rushworth didn't say how the parent company's troubles will affect Ihug's plans to invest $20 million on putting DSLAMs into exchanges in New Zealand, should a government decision on local loop unbundling come through.
Asked how serious the situation is, Malone says it's a profit downgrade. This is serious but it's due to lower than expected trading performance in the March quarter, he says. There is no indication of any wrongdoing, intended or implied, as per the announcement, Malone says. However, he says iiNet was late in indentifying that there was an issue due to some process issues but reiterates that the underlying cause is the poor trading performance.
Malone says iiNet intends to address the questions of what the process issues and clerical errors were that he blames the profit shortfall on in an announcement next week. He also intends to provide new guidance for the sharemarket then, but accepts responsibility for the errors that are behind the current problems.
The Australian Stock Exchange has yet to announce whether or not it intends to investigate iiNet for the erroneous forecasts and disclosure. However, auditors Ernst & Young are currently scrutinising the company to discover the reason for the forecasting deficiencies and errors Malone mentions.