Claims

Class Action – CIMIC Group Limited (ASX:CIM)

ICP, which is uniquely focused exclusively on ASX shareholder claims, has agreed to fund a shareholder class action against CIMIC Group Limited (“CIMIC”), subject to sufficient shareholder interest.

The action is to be run by Slater & Gordon Lawyers, on behalf of aggrieved CIMIC investors.

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Background to the allegations

 

ASX Code: CIM
ISIN: AU000000CIM7
Claim Period: 7 February 2018 to 17 July 2019 (inclusive)
Shares traded in Period: 199.2 million

The process of factoring of receivables is a financial transaction and a type of debtor finance in which a  business sells its accounts receivable (i.e. invoices) to a third party (called a factor) at a discount. A business  will sometimes factor its receivable assets to meet its present and immediate cash needs.

CIMIC disclosed the practice of factoring in 2018. However, the extent of the use of factoring over FY17 and FY18 and the impact on the cashflow result was not disclosed to the market by CIMIC until 2019.

On 17 July 2019, after the close of the market, CIMIC released its 1H19 Results (1H19 Results) and recorded a cash flow result, below analyst forecasts, as follows:

  • Operating cashflow result of $528m (down 34% pcp);
  • Net Operating cashflow result of $359m (down 49% pcp);
  • Free operating cashflow result of $33m (down 93.1% pcp); and
  • EBITDA conversion rate of 52% (down 40 percentage points pcp).
Claim Overview

There appears to be a proper basis to allege that:

  • on and from the release of the FY17 Results on 7 February 2018 to the release of the 1H19 Results on 17 July 2019, CIMIC engaged in misleading or deceptive conduct, in contravention of the Corporations Act 2001 (Cth), by disclosing the cashflow result for FY17 and FY18 without also disclosing the material ramp up in factoring of both receivables and payables in the corresponding periods and the enhancement of its reported cashflows due to that factoring;
  • from 7 February 2018 to 17 July 2019, CIMIC breached its obligations of continuous disclosure, in contravention of the Corporations Act 2001, by failing to disclose the impact of factoring on the reported cashflow result for FY17 and FY18;
  • by engaging in the conduct described above, CIMIC caused its shares to trade at prices significantly above their value; and
  • as a result, persons who purchased CIMIC shares between the period 7 February 2018 and 17 July 2019 have suffered compensable loss.

We consider that investors who acquired and held CIMIC shares during the claim period have a reasonable basis to seek to recover from CIMIC the amount of losses they have suffered from the purchase of those shares.

Class Members

Shareholders who acquired an interest in CIMIC shares traded on the ASX during the period 7 February 2018 to 17 July 2019 inclusive.

Current Status

We are currently seeking shareholder interest to determine whether the claim is commercially viable. Without sufficient support in the form of signed funding agreements, the claim may not proceed.

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