Login
Slaters, IMF launch class action against ASX-listed pallet company
National firm Slater and Gordon and global litigation funder IMF Bentham announced on Monday a new class action following ‘cannibalised’ growth by a listed Australian company.
Jerome Doraisamy
The action is being taken against Brambles, an ASX 20 company, that operates the CHEP and IFCO brands with a supply of reusable pallets, crates and containers across more than 60 countries.
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
It is alleged by Slaters and IMF that Brambles “cannibalised” its fiscal year 2017 growth and allegedly misled investors about its future profits.
The class action will be open to investors who suffered loss after acquiring shares in Brambles between 18 August 2016 and 17 February 2017.
The proposed allegations are as follows: that Brambles did not have reasonable grounds to issues its FY17 Guidance in August 2016, thus made misleading and deceptive representations to the market, and breached its obligations of continuous disclosure.
Slaters senior associate Andrew Paull said investors lost “millions of dollars” after Brambles revised its profit guidance in the first two months of 2017.
“Brambles had been enjoying a steady rate of growth for a number of years, but in FY16 its revenue and earnings grew at double the historic rate,” he said.
“This growth occurred after Brambles allowed a large number of its pallets to be used to transport goods to companies outside its regular distribution channels.”
“Brambles could charge a premium for this, which increased revenue, but they also list visibility over the whereabouts of their pallets, which significantly increased collection and repair costs,” he noted.
The costs associated with Brambles’ “exceptional” FY16 growth effectively “cannibalised” the company’s FY17 growth, he argued.
“This is not the kind of case where a company has failed to foresee risks that would negatively impact future growth,” he said.
“Brambles was telling the market that its FY16 sales growth of eight per cent and profit growth of nine per cent was the ‘new normal’ and could be expected into the future.”
As such, Slaters and IMF are alleging that Brambles knew its increased costs would make future growth at the FY16 rate impossible, and they failed to account for that in their FY17 forecast.
“The company has provided a variety of inconsistent reasons for its surprising guidance miscalculation but, in our view, these excuses just don’t stack up,” Mr Paull concluded.
This class action marks the latest collaboration between the two entities, following their action against milk supplier Murray Goulburn and a subsidiary earlier this month.
