Murray River Organics Group Limited (Murray River Organics) has paid a penalty of $33,000 after ASIC issued an infringement notice for an alleged failure by the company to comply with its continuous disclosure obligations.
The infringement notice was issued after an ASIC investigation into an announcement on 4 May 2017 by Murray River Organics to the Australian Securities Exchange (ASX) (4 May Announcement) that, due to seasonal factors, its earnings expectations for the 2017 financial year were materially below the forecasts made in its prospectus dated 8 December 2016 and providing the following revised forecasts:
- revenue would be $10 million (or 12.8%) below forecast of $78 million;
- EBITDA would be $12.5 – $13.5 (or 21.4% – 15.1%) below forecast of $15.9 million; and
- NPAT of would be $4.2-$4.9 million (or 36.4% – 25.8%) below forecast of $6.6 million.
ASIC alleges that, by 26 April 2017, Murray River Organics was aware that its revenue, EBITDA and PBT for the 2017 financial year were likely to be materially below the forecasts contained in its prospectus, although the extent of the divergence was uncertain as at that date.
ASIC alleges that by failing to inform the ASX on 26 April 2017 that its revenue, EBITDA and PBT for the 2017 financial year was likely to be materially below the forecasts contained in its prospectus, Murray River Organics was in breach of its continuous disclosure obligations between 26 April and 4 May 2017.
ASIC Commissioner Cathie Armour said:
Listed companies must immediately notify the ASX of information that a reasonable person would expect to have a material effect on the price or value of the company’s securities, whether that information is positive or negative for the company.
Where a company experiences a material variation in forecast financial guidance, the company must carefully consider whether the market needs to be informed and, if so, provide this information promptly and without delay, or seek a trading halt pending confirmation of the extent in variation.
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 details listed companies’ continuous disclosure obligations.
The Corporations Act provides that compliance with infringement notices is not an admission of guilt or liability.
Murray River Organics is not, by reason of its compliance with the notice, regarded as having contravened section 674(2) of the Corporations Act.