The Federal Court has ruled Myer (ASX: MYR) will not need to pay damages in a class action brought by Amies Superannuation Fund trustee TPT Patrol, despite finding the retailer had engaged in misleading or deceptive conduct over a four-month period in FY15.
The proceedings stemmed from a verbal statement made on 11 September 2014 by then CEO Bernie Brookes who said Myer "anticipated profit growth" for FY15, implying the figure would be higher than the $98.5 million achieved in FY14.
However, on 19 March the retailer then announced NPAT guidance of between $75-80 million with a 40.5 per cent cut to operating gross profit margins.
In the proceeding six months the share price lost almost 40 per cent of its value falling to $0.90, and the stock has struggled ever since with shares worth $0.56 each at the time of writing today.
Even though the company's fortunes did change over the course of the first half of FY15, Justice Beach ruled yesterday that Myer had reasonable grounds in making its representation of expected profit growth.
As such, he dismissed a claim that the representation was misleading or deceptive or involved a breach of Myer's continuous disclosure obligations at that time.
Nevertheless, the court did rule that Myer was required to make a corrective announcement as it became aware that its NPAT would be materially lower than in FY14. In the judgment, Justice Beach presented the timeline that followed, as presented by the applicants.
The class action claimed that as early as 5 October 2014 the buying gross profit to date over 10 weeks was $2.28 million behind forecast, and that shortfall got larger over time to $13.56 million on 9 November.
A few days later in mid-November Myer already had a draft FY15 budget disclosing an NPAT forecast for $92 million, which already would have been below the minimum threshold of the forecast made just two months earlier.
On 8 December the company's CFO gave Brookes a draft forecast presentation indicating FY15 profit would be lower than in FY14 by around $7 million.
Just before Christmas, Myer's general manager for corporate affairs and media drafted a statement to notify the market around 5 January that the group no longer expected to achieve earnings growth - the draft was given to Myer's CEO, CFO and Company Secretary for their consideration.
By the time 5 January came around, the board held a telephone conversation concluding a NPAT forecast of $90 million, and determined that no update to the market was necessary as that forecast was "in line with the Bloomberg consensus".
Justice Beach held that by failing to make a corrective announcement until 19 March 2015, Myer engaged in misleading or deceptive conduct and contravened its continuous disclosure obligations on and from 21 November 2014 until that date.
"Notwithstanding these contraventions, the Court found that there is no evidence which establishes that those contraventions caused any loss or damage to the class members," Myer said in an announcement to the ASX yesterday afternoon after the market closed.
MYR shares came out of a trading halt this morning and dropped slightly by 1.4 per cent to $0.56.Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
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