Slater and Gordon has filed a class action against The a2 Milk Company in the Victorian Supreme Court. The action is on behalf of investors who bought shares over the nine-month period from 19 August 2020 to 9 May 2021.
The Statement of Claim alleges a2 Milk breached the Corporations Act through misleading or deceptive conduct as well as breaching continuous disclosure rules in posting four downgrades on 28 September and 18 December 2020, and 25 February and 10 May 2021.
The collapse of the daigou/reseller and ecommerce channels and subsequent inventory write-downs had a bruising impact on a2 Milk, with it recording a 77.6 per cent fall in revenue in FY21.
On 10 May, the company announced its fourth profit downgrade in four months, the resignation of its Asia Pacific CEO, and a blowout of almost $93 million in provisions for old stock. Investors wiped $690 million off its market capitalisation after the announcement.
The downgrade saw a2 Milk expecting full-year sales of $1.2-$1.25 billion and a group EBITDA margin of 11-12 per cent. In comparison, its 19 August 2020 guidance was for strong sales growth and an EBITDA margin of 30-31 per cent.
Slater and Gordon Class Actions Practice group leader Kaitlin Ferris said a2 Milk was or ought to have been aware that its FY21 guidance didn’t adequately consider factors that were likely to have an impact on the company’s financial performance.
“As a result of our investigation following a2’s profit downgrades throughout FY21, 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.
“Investors are entitled to assume that when they purchase shares in a listed company, all of the material information relevant to its financial position has been disclosed. The repeated downgrades by a2 during the August 2020 to May 2021 claim period caught the market by surprise and revealed that a2 had been facing systemic and structural issues with its distribution networks at an early stage of the financial year.”
In a statement to the ASX, a2 Milk countered the allegations, saying it had complied with its disclosure obligations at all times and would “vigorously defend” the case. it said it remained confident in the underlying fundamentals of the business and its growth potential.