Vocus Group has agreed to a $35 million settlement to soothe shareholders who were burned after a shock earnings downgrade in 2017 shaved hundreds of millions of dollars off the telecommunications company’s market cap.
The hefty figure comes after a long-running fight between the Dodo and iPrimus owner and disgruntled investors that culminated in a class action in April, after two years of turbulent financial results and a major reshuffle of the company’s executive ranks.
Vocus will now pay $3.5 million of the total settlement, with the rest covered by the company’s insurance. The settlement does not include an admission of liability and requires Federal Court approval.
A statement posted by the telco to the ASX on Monday said the agreement “was a commercial decision made in the best interests of the company and its shareholders”.
The issues for shareholders kicked off in November 2016 when Vocus told the market it expected revenues would be $1.9 billion for 2017, with earnings (before interest, depreciation, taxation and amortisation) from $430 million to $450 million and net profit after tax between $205 million and $215 million. Vocus had reiterated this guidance during its first-half results in February 2017.
However, Vocus downgraded its expectations in May 2017 to $1.8 billion in revenue, earnings from $365 million to $375 million and net profit between $160 million and $165 million.
This was the second downgrade in seven months for the telco and saw $600 million wiped from its market cap.
Slater and Gordon Lawyers revealed in June that the class action’s applicants alleged the company had misled the market when providing guidance for the expected financial performance in the 2017 financial year.
The class action, funded by Woodsford Litigation Funding, claimed the company misled shareholders about the potential net profit after tax, earnings and synergies available without reasonable grounds. The group argued Vocus had breached its continuous disclosure requirements, including that the guidance would not be achieved, and said shareholders had suffered a loss as a result.
The business has had a rollercoaster year in 2019 after two takeover bids, from energy company AGL and private equity firm EQT, were ditched during due diligence.
Vocus chief executive Kevin Russell said in August the business was trying to build credibility with shareholders and to make sure the market was fully informed.
Slater and Gordon principal lawyer Kirsten Morrison said in a statement that the process allowed the fast-tracking of settlement discussions, with this case finalised within eight months.
“We are pleased that we were able to achieve an efficient resolution delivering what we believe is a fair and reasonable outcome for group members while minimising delay and costs,” Ms Morrison said.
“Subject to court approval, our focus will now be on ensuring that the proceeds are delivered to group members as quickly and efficiently as possible.”
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