Another class action filed on Treasury Wine Estates
Treasury Wine Estates (ASX: TWE) is now facing its second class action after it was alleged of engaging in misleading or deceptive conduct and breached its continuous disclosure obligations to the market.
The allegations are contained in a new action launched by Slater & Gordon in the Victorian Supreme Court, with shareholder Brett Stallard as trustee for the Stallard Superannuation Fund, the plaintiff.
Law firm Slater & Gordon alleges that Treasury misled its stakeholders after revising its guidance in January. A similar potential action is also being investigated by Maurice Blackburn.
“As a result of our investigation following Treasury’s profit downgrade on 28 January 2020, we concluded that there was a strong basis to allege that the company provided misleading guidance, and was obliged to correct the market’s understanding of its financial position at a much earlier time,” senior associate Kaitlin Ferris said.
“The claim relates to conduct which predates any Treasury announcement about the impact of coronavirus (COVID-19) on its business and operations”.
It is alleged that on 14 February 2019 the wine giant engaged in misleading or deceptive conduct when its forecast reported EBITS (earnings before interest, tax and the agricultural accounting standard SGARA) growth of about 15 per cent to 20 per cent in the 2019-20 financial year.
The forecast reduction from 15 per cent to 20 per cent to 5 per cent to 10 per cent EBITS growth related to challenges in the US market, where not only had competitors been undercutting prices but TWE itself had suffered from unexpected leadership changes.
Unforeseen circumstances had meant Angus McPherson – who has been with the group for almost a decade – was unable to work in the US, and the company announced he would be replaced by Constellation Brands executive Ben Dollard.
S&G notes in August 2019 the group had stuck by its EBITS growth forecast of 15 per cent to 20 per cent, and noted its FY20 EBITS result would be delivered by growth in all markets, through continued top-line growth and premiumisation as well as ongoing operational efficiency.
Yet, Treasury Wine Estate shares lost 26 per cent of their value on 29 January, after the company said a glut of surplus wine in the US meant it only expected its earnings to grow by 5 per cent to 10 per cent, rather than the previously forecast 15 per cent to 20 per cent range.
Ms Ferris said that the claim had been issued on an open class basis, and therefore covers all shareholders who purchased shares in Treasury between 14 February 2019 to 28 January 2020.
After fears that the profit powerhouse of China would be severely hit after the coronavirus outbreak along with two profit downgrades which flattened the share price, Treasury Wine was part-way through a strategic review of its operations.
Chief executive Mike Clarke is also leaving by 1 July and the company is going through upheaval after five years as a sharemarket blue chip.
TWE confirmed it was served with a group proceeding in the Supreme Court of Victoria.
“The statement of claim includes allegations of contraventions of the Corporations Act in relation to continuous disclosure and the Corporations Act and ASIC Act in relation to misleading or deceptive conduct,” Treasury Wine Estates said in a release on Friday.
“TWE strongly denies any and all allegations of wrongdoing and intends to vigorously defend the proceeding.”