Treasury blast research house GMT over ‘false’ report

Treasury will refer research house GMT to ASIC after its damning report hammered the wine maker’s shares.

Treasury boss Michael Clarke. Picture: Carla Gottgens

Treasury Wine Estates says it will refer GMT Research to the securities regulator, after a damning report from the group prompted an early 8 per cent drop in its shares before ending the session flat.

The Hong-Kong based GMT published a report to subscribers alleging the wine maker had manipulated its profits through accounting trickery.

“Treasury Wine Estates (TWE) may have inflated profits by up to 50 per cent over the last two years through the use of acquisition accounting to write down inventories and establish other liabilities,” GMT said.

“Weak operating cash flow with a widening divergence from cash profits raises additional concerns that profits are being manipulated.”

Treasury shares slipped by 7.7 per cent to $15.28 and were halted before bouncing back to $16.12.

In a statement to the market, Treasury slammed the report as “false” and “misleading” saying, it was referring the matter to the Australian Securities and Investments Commission.

The company affirmed its guidance for the full year and said results to be released on August 15 “will discredit claims made in this report”.

“TWE notes it has already provided guidance on key metrics including P&L, balance sheet, and cash conversion and has no further comment.”

At its interim results in February, Treasury forecast 25 per cent earnings growth for the full year, and between 15 per centc and 20 per cent in full year 2020. Last year, the company reported earnings of $530.2 million.

GMT Research responded to The Australian outlining its model as a service for “paying subscribers who are institutional investors” and clarifying that they “do not take any positions ourselves in the stocks we write about”.

“Our report on Treasury Wine was published confidentially to our subscribers on 7 August,” analyst Nigel Stevenson said in a statement.

“In the report, we set out our considered and frank view on the company and its financials. We note Treasury Wine’s response to our report but do not intend to comment further at this time. “

The research house was also behind a critical report on Cimic earlier this year, which saw the stock shed 7 per cent on claims of financial account “engineering”.

This is not the first time this year that Treasury Wines has been forced to defend its books, after it was slammed at the Sohn Investment Conference in New York in May.

Bayberry Capital Partners founder and managing partner Angela Aldrich accused Treasury of so-called channel stuffing and warned that one of its big-selling US wines was facing stalling growth.

Shares in Treasury pushed higher after its return to trade and finished broadly flat at $16.57.