Class action lawyers Slater and Gordon (SGH) and litigation funder IMF Bentham Ltd (IMF) are investigating a claim against Bellamy’s Australia Ltd (Bellamy’s, ASX:BAL) on behalf of persons that acquired BAL securities between 14 April 2016 and 9 December 2016 inclusive (potential claim period).
SGH considers that eligible shareholders are likely to have claims againist Bellamy’s in relation to losses arising out of:
a. the company’s release to the ASX on 2 December 2016, which contained the following information:
- the company’s revenue for the financial year ending 30 June 2017 (FY17) would be approximately $240 million (a substantial shortfall compared to market expectations and analyst consensus);
- the company was experiencing “temporary volume dislocation in China due to regulatory changeover”;
- sales performance on the critical Chinese ‘Singles Day’ was below expectations, and an expected increase in sales in the Chinese market following Singles Day was “softer than anticipated”; and
- as a consequence of additional investment, its FY17 EBIT margins would be “moderately below 20%”.
(the 2 December 2016 Business Update)
b. the company’s 11 January 2017 release to the ASX, following a 12 December 2016 trading halt and 14 December 2016 trading suspension, which further disclosed that:
- the company’s supply contracts required the company to purchase minimum volumes of product, and that, as a result of failing to meet these requirements, it expected to pay shortfall payments of between $11m and $13m in each of the coming two years;
- the company’s 1H17 EBIT margins had fallen to between 10% and 12%, and EBIT for FY17 was forecast to be $22m to $26m, which marked a fall of between 50% and 60% on FY16 levels.
(the 11 January Trading Update)
(together, the FY17 Downgrades).
On 14 April 2016, Bellamy’s made an announcement to the ASX regarding recent regulatory changes announced in China, titled “Bellamy’s well placed to continue growing in China”, noting that the company believed it was “well placed to transition to the new requirements once they are known”.
On 17 May 2016, Bellamy’s released a presentation to the ASX which detailed the company’s responses to potential Chinese regulatory change and noted that it was “well positioned for potential regulatory changes in China”.
On 19 August 2016, Bellamy’s released its results for the financial year ending 30 June 2016 (FY16), noting, inter alia, that:
- it was “set to benefit from new Chinese regulations"
- it had “strong foundations to continue [its] growth strategy; and
- its EBIT margin had more than doubled between FY15 and FY16 to 22%.
On 19 October 2016, at Bellamy’s AGM, the company reiterated the messages of the 19 August 2016 releases.
The price of BAL shares fell by approximately 45% in the trading days following the 2 December 2016 Business Update.
The 11 January 2017 Trading Update, saw the price of BAL shares fall by a further 40%, increasing the total negative price reaction to the FY17 Downgrades to 66% of the 1 December 2016 price.
On the basis of SGH’s investigations to date, we consider that there may be a reasonable basis to allege that during the potential claim period, Bellamy’s:
- contravened its obligations of continuous disclosure of price sensitive information under section 674 of the Corporations Act 2001 (Cth), by failing to keep the market informed of matters relevant to its FY17 financial performance.
- made statements regarding benefits arising from regulatory change in China which amounted to misleading or deceptive conduct in contravention of section 1041H of the Corporations Act 2001 (Cth).
To register your interest and to receive further information regarding the potential claim and funding arrangements, please visit https://www.imf.com.au/cases/register/bellamys