On Tuesday 22 June 2010, Elders Limited (Elders) announced to the market that it expected its full year results would be significantly lower than what it had forecast in its September 2009 Prospectus (the Prospectus).
Specifically, the company revised its previous forecast of a $55.7 million underlying profit for the 2010 financial year, down to an expected underlying loss of between $8 and $14 million (the June disclosure). In response to the June disclosure, Elders’ share price plummeted to around 37.5 cents, a fall of approximately 56 per cent.
1. Background
Elders’ business involves the provision of Rural Services, Financial Services and Real Estate within the Australian and New Zealand agriculture sector.
On 4 September 2009, Elders announced to the market that it had suffered a net loss after tax of $223.1 million and an underlying net loss after tax of $26.9 million for the 2009 financial year.
On the same day, Elders released details of a recapitalisation and refinancing plan, which included a multi million dollar equity raising venture. Elders’ forecast to the market at this time that its business would, following implementation of the initiatives announced, deliver a net profit after tax of $50.1 million, and an underlying net profit after tax of $55.7 million for the 2010 financial year (the 2010 profit forecast).
The 2010 profit forecast was reaffirmed by the company throughout late 2009 and early 2010.
On 3 May 2010, the company revised its underlying profit after tax forecast for the 2010 financial year down by $7.7 million (the revised forecast).
On 17 May 2010, the company posted a 1.1 million underlying profit after tax for the half-year ended 31 March 2010. The company noted that it anticipated a substantial lift in its earnings in the second half of the 2010 financial year, and that it expected this lift would enable the company to achieve the revised forecast.
On 22 June 2010, Elders, despite its previous assurances, disclosed to the market that it would be unable to meet its original or revised forecasts, and instead expected that its underlying net profit after tax for the 2010 financial year would range between a loss of $8 million and loss of $14 million.
In response to the June disclosure, Elders’ share price dropped to around 37.5 cents. This represented a fall of more than 50 per cent in the company’s share price.
2. Our Investigation
Slater & Gordon is investigating the 2010 profit forecast, and the disclosure practices of the company between 4 September 2009 and 22 June 2010 (the claim period).
In our opinion, there is a reasonable basis to allege that throughout the claim period, Elders:
(a) engaged in misleading or deceptive conduct in breach of the Corporations Act 2001 (Cth) (Corporations Act) and equivalent legislation; and:
(b) breached its continuous disclosure obligations under the Corporations Act and the ASX Listing Rules.
We advise that persons that acquired Elders shares during the claim period have suffered a compensable loss, and have claims against the company that have good prospects of success. The total amount of damages claimable in the proceeding against Elders could be in excess of $330 million.
In our preliminary opinion, the allegations to be made against Elders relate to disclosure failures concerning the company’s:
(a) farm supplies business, especially relating to glyphosate-based herbicides; and
(b) meat and livestock trading business, which specialised in the export of livestock to Indonesia.
To further our investigation, we have briefed Senior Counsel to advise and draw a Statement of Claim, and engaged consulting forensic accountants to assist in analysing Elders’ financial disclosure during the claim period.
Comprehensive Legal Funding is funding Slater & Gordon’s investigations.
3. Contact Us
If you acquired Elders shares between 4 September 2009 and 22 June 2010 and wish to receive an information pack about the proposed class action, please telephone 1800 555 777 or click here to send us an online enquiry.