Fyffes is under scrutiny following the revelation that the company’s 1999 accounts were boosted by a previously undisclosed provision of €19 million.
The company is also facing pressure following its admission that the directors made a “judgment call” not to tell the market about potential difficulties when it issued a trading statement for 2000.
Fund managers said the admission would cause long-term damage to Fyffes reputation in financial circles.
The news may also mean some directors could be voted off the board when they seek reappointment at the company’s next shareholder meeting.
Fyffes issued a trading statement on December 14, 1999, giving details of its results for the year to the end of October, and an update on prospects for the following year.
Its shares closed at €1.80 on December 14 and peaked at €3.98 on February 18, 2000.
The company issued a profit warning on March 20, 2000, citing the weakness of the euro against the dollar for hitting its earnings.
The first time most investors became aware of the provisions contained in the 1999 accounts was last week, when David McCann, Fyffes chief executive, was questioned during the insider trading case currently being staged in the High Court.
Fyffes pre-tax profits for the 12 months, ending October 1999, came in at €83.9m, marginally ahead of the €78.9m recorded the previous year.
The market was unaware, however, that the 1999 figure was achieved by releasing provisions worth €19m from money set aside to cover the effects of hurricane Mitch and loans to banana growers.
Without this, Fyffes’ profits in 1999 would have been around €65m, some 17.5% lower than the previous year.
McCann was questioned repeatedly about the outlook statement released by Fyffes when it published its preliminary results for the 12 months, ending October 1999.
The statement, released on December 14, 1999, said 2000 would be “another year of growth” for Fyffes.
McCann later admitted to concerns about the performance of the company but that it was the judgment of the board that the statement released, predicting “another year of growth”, was “the appropriate thing to say to the market”.
In later cross-examination the Fyffes chief executive admitted to “plenty of worries” as to how the year might turn out. “We put into the market the announcement that we did, because we thought it was too early to do anything else.”
On Friday, last week, McCann went further, admitting that the outlook statement issued to the market on December 14, “was neither accurate nor complete”.
