Embattled logistics giant Brambles faces a fresh challenge in the shape of a potential $100 million class action over alleged failures to keep investors informed.
Brambles, which is a global pallet giant that operates in more than 60 countries, faces the prospect of a Maurice Blackburn-led class action that will allege the company failed to keep investors informed about its true financial position leading into the early months of this year.
With the support of British litigation funder Harbour, Maurice Blackburn argues that Brambles had misled investors when it reaffirmed earnings guidance for the 2017 financial year in October of 2016.
Brambles indicated in January, about 11 weeks later, that it would not meet that guidance, triggering a 15.8 per cent fall in its share price, then a month later it again downgraded guidance, sparking a further 9.9 per cent fall.
At its result, in August last year, Brambles provided guidance of sales growth of up to nine per cent and profit growth of up to 11 per cent for the 2017 financial year.
It reaffirmed that guidance its annual general meeting in November where chairman Stephen Johns told investors that the outlook for both measures "remains unchanged".
"We remain committed to the five-year targets we set in December 2013 and our ongoing business strategy," Mr Johns told investors at that meeting.
The miss was blamed on a softer than expected performance out of Brambles' North American business.
The court case will do little to improve the mood of angry investors at this year's annual general meeting.
It is understood there is a good chance the company will cop its first strike against its remuneration report from investors at its annual general meeting on Wednesday.
At the meeting Mr Johns is standing for re-election to 2020, meaning he will have served for 16 years at the end of his term, but is likely to attract a hefty protest vote of up to 20 per cent against his re-election.
Typically a chairman seeking re-election would expect to attract up to 98 per cent support, one source said.
"The intensity of the trading was a clear indication that the market was shocked."
Maurice Blackburn's Brooke Dellavedova
Maurice Blackburn class action principal Brooke Dellavedova said the firm would assess investor interest and the merits of the case before lodging a formal action.
"It is difficult to say what it might be worth, but looking at the trading volume and the price drop, I would expect it to be in that $100 million ball park," she said.
The investor reaction to the guidance downgrade was "severe" with trading volumes on "both occasions around five times greater than average volumes over the previous year", she said.
"The intensity of the trading was a clear indication that the market was shocked, which is understandable given the strong affirmation of its forecast only weeks before downgrading its guidance," Ms Dellavedova said.
"When you look into how the logistics company operates, it seems unfathomable that there weren't earlier triggers to alert the company to the sales and profit changes that were eventually disclosed.
"The laws are clear on disclosure, the market needs to know as soon as the company knows in order for the market to function fairly and efficiently."
The company has cited "destocking" retailers and a changed competitive environment as causing problems in North America, but Ms Dellavedova said both those trends were apparent when the guidance was reaffirmed in October last year.
"The de-stocking didn't happen overnight at the end of December ... and the changes to competitive pressure had been coming for some time," she said.
Brambles declined to comment. The class action will be open to Brambles shareholders who purchased shares between October 20, 2016 and February 19, 2017.This story was found at: http://www.smh.com.auAuthor: Mathew Dunckley