Businesses are always keen to talk up their prospects and bad news, if there is any, tends to be coated for public consumption in a healthy pile of sugar.

Or at least something to disguise the taste.

But should listed companies with their many public shareholders be more blunt, call a spade a spade, spit it out?

Let me know what you think of this situation.

Heartland New Zealand, a "non bank deposit taker" with aspirations to be a bank, has been working hard to build up a solid business from the merger of two finance companies - Marac and PGG Wrightson Finance - and two building societies - CBS and Southern Cross.

Late on Monday it released a profit forecast saying net profit for the year to June 2012 would be $20-$22 million.

That's not a big change on its previous forecast of $20-$24m, so maybe investors wouldn't be too concerned.

Except that it is, and it seems they were.

The nagging detail professional investors spotted involved a one-off tax benefit of $5-$6m.

On August 2, Heartland forecast 2012 profit at $20-$24m.

On August 18, it announced that a law change had produced a one-off deferred tax benefit for the 2012 year of $5-$6m.

"HNZ has previously forecast npat of between $20m and $24m for the 2012 financial year, assuming the acquisition of PGW Finance," it said. "This [tax] credit will have a positive impact on that forecast."

This meant, by implication, that the 2012 profit could now be in the range of $25m-$30m, although it was not stated.

Fast forward to this week, and the tax credit has been factored in to the new forecast. Describing the various factors affecting its new forecast, Heartland said "the impact on earnings [of those factors] has been offset by the previously announced one-off deferred tax benefit of $6m..."

So rather than a modest paring of up to 8 per cent, the new forecast actually amounts to a drop of 23-27 per cent in forecast profit.

While Heartland has released enough information to work that out, my guess is no-one reading Monday's profit forecast on its own would be remotely aware such a radical profit warning was being made.

Certainly there was no mention of how much the new forecast differed from the previous number.

Does that matter?

Heartland CEO Jeff Greenslade says all the information was available to investors.

"We've given everybody all the facts," he says. "There's a balance between IFRS [accounting standards] and working really hard to try and create a clear picture that most people have been able to get their heads around."

"Is the underlying performance ... less than we forecast? The answer is yes. I don't think any of the market commentators have done anything other than pick that up."

Greenslade is probably justified in saying the market understood the implications of the announcement. By late afternoon today, Heartland shares had eased 1c on relatively high volume of $445,000.

But if the announcement was to inform the market of a drop in forecast profit of up to 27 per cent, should it not have just said so?

- © Fairfax NZ News