Retail Food Group now staring down a class action law suit
Written on the 21 December 2017 by David Simmons
A law firm who took on Volkswagen has now turned its attention to Gloria Jean's and Donut King's owner Retail Food Group.
Bannister Law is looking into whether shareholders of RFG can launch a class action against the company over whether it breached the Corporations Act in regards to the timing of its earnings forecasts.
The firm will also look into whether RFG should have corrected its guidance earlier than Tuesday, December 19, when the company gave a trading update flagging first-half profit below that of FY17.
"If those investigations show that RFG contravened provisions of the Corporations Act, Bannister Law may launch a class action on behalf of shareholders of RFG," says Bannister Law.
Shares in Retail Food Group are up by 25 per cent to $2.05 per share at 1:30pm AEDT a sharp increase from yesterday's low of $1.62, but still a fraction of its former September 2016 share price of $7.20.
The uplift for RFG, which manages chain stores like Brumby's Baker, Gloria Jean's, and Pizza Capers, stems from an announcement to the market which sees the company's directors backpedalling.
The group is insisting two major points, first that it has not revised its half year guidance, and second, made the market aware as soon as practicable of changes to its statutory net profit guidance.
On the first point, RFG claims a 'half year guidance' was never issued in the first place, and thus no revision could have been made.
"To be clear, the statement made by RFG in its 7 December 2017 release relates to underlying NPAT growth for the full finance year for 2018," says Sara Bradford, head of communications and investor relations at RFG.
In terms of the question posed by the ASX to RFG, "when did RFG first become aware of the revised half year guidance?", RFG says the assessment of the anticipated NPAT for the half year ending 31 December was done at a meeting early in the morning of 19 December 2017. The announcement regarding the downgrade in profit was made following that meeting.
"RFG has acted promptly and without delay in this matter," says Bradford.
The company's woes relate back to the 11 December following a Fairfax Media investigation into the company.
Fairfax reported RFG was crippling its franchisees in both a fiscal and personal sense, and that hundreds of RFG branded stores have closed within the past year.
Fairfax estimates around 17 per cent of Gloria Jean's stores are currently listed for sale, while Pizza Capers listings have hit 25 per cent.
When announcing the profit downgrade RFG blamed the Fairfax media report and tough retail conditions for its dip in earnings.
At the time, RFG rejected all of the accusations made by Fairfax and a number of franchisees quotes in the report, saying its financial and operation performance was not "accurately reflected" in the coverage.
"The Company's current strategy, management team focus on responding to challenging retail market conditions, including efforts to support its Franchise Partners and their team members, and its financial and operational performance, all of which have previously been announced by the Company, are not, in the Company's view, accurately reflected in the Fairfax Media's coverage," said RFG in a statement to the ASX on December 11.
Business News Australia
Author: David Simmons