This week’s profit downgrade by
refrigeration and air conditioning outfit Hastie Group
looks like yet another warning for punters about buying tizzed up companies
from venture capitalists. The company’s official announcement of the downgrade
is also an object lesson in failed spinning.

The Hastie float was not an easy one for
underwriters Macquarie Equities last March. The IPO was delayed and then the
price reduced to $1.50 a share to get it away. Hastie rallied above $2 for a
little while last year in the raging bull market but it was back down to $1.60
on Wednesday and it was worth $1.59 this morning.

The Hastie prospectus was notable at the
time for the less than totally-up-front way it disclosed what was being
done
with the $190 million or so being sought from the public. You had to
wade
through to page 72 to find a little paragraph that told you more than
80% of the dosh was going in to buying out the venture funds at an
undisclosed
but-no-doubt-healthy profit. Hastie’s announcement
to the stock exchange on Tuesday showed it’s still spinning first and providing
the less pleasing facts second. In fact, if you were unfamiliar with the Hastie
story, you might well think the announcement was a profit upgrade rather than a
downgrade.

Hastie said it expected 2006 financial year
earnings before interest and tax to be between $28 and $29 million based on
first-half trading. The result “includes a $4 million write-back of a provision
that is no longer required” – in other words, the normal operating profit would
be between $24 and $25 million. That doesn’t look too bad in the announcement
though because the spinners immediately note the prospectus forecast was $25.8 million and
there’s some stuff about another $2.6 million for the bottom line from a
one-off tax deduction on float costs anyway.

They admit the refrigeration division sales
were lower than expected and growth costs were higher – but at no stage is there any mention of
managing director Jerry Maycock upgrading the EBITA forecast to $28 million in
September. Let’s just pretend it never happened.

Thus Hastie was really announcing a
downgrade of up to $4 million – 14% – while trying to make it look like
something less damaging. It didn’t succeed and made itself look a little tacky
in the process.

Silly really.