Vocus Group has been given the go ahead by the Federal Court of Australia to proceed with the $35 class action million settlement it flagged late last year.
Vocus was served with a class action proceeding in the Federal Court in April last year, well over a year after law firm Slater and Gordon said it would bring an action against the telco on behalf of shareholders.
In September 2017, Slater and Gordon said it would allege in its action that Vocus misled shareholders over its 2017 financial year guidance, saying it had “no reasonable grounds for the original FY17 guidance issued in November 2016”.
The move came after Vocus released unaudited results in August 2017 for the 2017 financial year, bringing in a net profit after tax (NPAT) of $152.3 million, well below the company’s guidance range of $160 million to $165 million.
According to the Australian telco, the downgrade was primarily due to higher than forecast net finance costs and a higher effective tax rate at 33.4 per cent.
This followed the company’s move in May to wipe off $100 million from its revenue target for the financial year ending 2017, blaming the forecast downgrade on lower than expected billings in its enterprise and wholesale business, and re-jigged terms on a number of large projects.
“Our investigations to date suggest Vocus had unreasonable expectations about the costs involved in integrating its newly acquired platforms and technology systems,” Slater and Gordon principal lawyer Mathew Chuk said at the time.
“The company expanded significantly since 2015 by acquiring other businesses such as Amcom and Nextgen Networks, as well as merging with M2 Group Ltd,” he added.
Roughly eight months after being served with the class action, in late December last year, the publicly listed telco told shareholders that it had reached an agreement to settle the class action.
“The settlement of the class action, which is without admission of any liability, is subject to Federal Court approval,” the company told shareholders at the time, adding that the settlement amount was $35 million, inclusive of interest and costs.
Vocus said it would contribute $3.5 million to the settlement, which would be reported as a significant item below its underlying pre-tax earnings (EBITDA). The remainder of the settlement was fully insured, the telco assured shareholders.
Now, with the Federal Court approving the settlement of the securities class action, Vocus is finally in a position to put the matter behind it — nearly three years after the spectre of a class action first raised its head.