ASX-listed company Adairs Limited (Adairs) has paid a penalty of $66,000 after ASIC issued an infringement notice alleging it had not complied with the continuous disclosure obligations.
ASIC has found there are reasonable grounds to believe that Adairs was in breach of its continuous disclosure obligations between 23 September and 2 November 2016 by failing to inform the ASX that its forecast figures for the 2017 full financial year would be materially lower than the market consensus.
ASIC Commissioner Cathie Armour said, "It is fundamental to the integrity of the market that listed entities disclose market sensitive earnings surprises immediately."
Background
On 26 August 2016 Adairs announced its full financial year 2016 results together with forecasted sales, sustainable gross margin and capital expenditure for the full financial year 2017.
Subsequent to the above announcements, broker analysts covering Adairs released reports with revised forecasts for Adairs. The market consensus of the brokers' forecast for Adairs' full year financial year 2017 was:
- EBITDA of $51.5 million
- EBIT of $44.5 million; and
- NPAT of $29.9 million
On 23 September the board of Adairs received updated financial reports in relation to its actual performance and contained revised forecasts results for the full financial year 2017. The revised forecasts for the full financial year 2017 were:
- EBITDA of $42.664 million
- EBIT of $36.682 million; and
- NPAT of $24.246 million
ASIC alleges that by 23 September 2016, Adairs became aware that its forecast figures for EBITDA, EBIT and NPAT for the full financial year 2017 would be materially lower than the market consensus.
On 2 November 2016 Adairs released a trading update to the ASX which announced that trading in the first four months of the financial year 2017 was below Adairs' expectations and contained Adairs' revised guidance for the full financial year 2017.
Details of the infringement notice will be published in the ASIC Gazette.
Section 674(2) of the Corporations Act and ASX Listing Rule 3.1 detail listed companies’ continuous disclosure obligations.
The Corporations Act provides that compliance with infringement notices is not an admission of guilt or liability.
Adairs is not, by reason of its compliance with the notice, regarded as having contravened section 674(2) of the Corporations Act.