Central argument is whether trading information was price sensitive

There is no dispute but that DCC chief executive Mr Jim Flavin was in possession of very detailed information in February 2000, reports Colm Keena

In the final months of 1999, the board of Fyffes plc was presented with some grim facts.

On Friday, October 29th, the directors of the international fruit distributors were given a budget presentation that described the financial year just coming to an end as having been "difficult and challenging".

The directors assembled that day included Mr Jim Flavin, chief executive of DCC and non-executive director of Fyffes.

The budget presentation included:

a five-year analysis of sales and profits for each of the Fyffes divisions;

a forecast for the year to October 31st, 1999;

a budget for the year to October 31st, 2000;

a sensitivity analysis showing the precise effect on profits of changes in banana prices and exchange rates.

More than 70 per cent of Fyffes profits were to come from the banana division in 2000, but prices in the all-important UK market were on the floor. This fact had hit profits in the latter part of the year and there was no sign of early change .

There was an oversupply of bananas and a trade war under way between the UK multiples. Bananas were at 1993 price levels.

Furthermore, exceptional items in 1999 had boosted profits by €19 million but no such boost would be available for 2000, when the company was planning for an €84 million profit.

These facts were not known in the market. The market expected growth every year so, despite low prices, the company had to boost profits significantly from its underlying trading.

Mr Paul Gallagher SC, for Fyffes, said the budget produced by Fyffes for 2000, was a very cautious one. "Comprehensive and detailed information on every aspect of the Fyffes operation, was presented with this budget."

At one stage at the board meeting, someone commented that the company was monitoring the need to make a statement to the market. Mr Flavin responded: "This is a marginal call and this is the last day of availability to nudge the analysts."

Mr Gallagher said this indicated Mr Flavin's understanding of the need to avoid producing year-end figures that were below market expectations, so as to avoid negative effects on share prices.

There was a potential shortfall between outcome and expectations for the 1999 year and Mr Flavin was raising the issue as to whether the analysts should be guided in relation to this, so as to prevent the eventual release of figures that were below market expectations.

In the period to January 25th, 2000, Mr Flavin, in his position as a board member, was given further information. This showed that the November and December figures were below the expectations set out in the budget. He was also given an informed forecast for January.

The figures showed the three-month performance as being €7.3 million below the budget forecast. In other words, if the firm was to end the 2000 year ahead of the 1999 year, it had a significant mountain to climb during the remaining three quarters.

DCC and Mr Flavin will argue that the information he had may have been confidential but was not price sensitive. Furthermore, they will argue that the Fyffes share price in February 2000 was being driven by Fyffes's Worldoffruit.com project, which had been launched in September 1999.

The fruit distributor will agree but say the trading performance of the company was still a significant issue.

At a board meeting on December 9th, 1999, it was stated that Fyffes was hoping a $100 million valuation would be put on the Worldoffruit.com venture. Mr Flavin expressed the view that the value of internet ventures was likely to decline dramatically in the short term.