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Disgruntled shareholders in Vocus Group (ASX: VOC) are taking legal action against the Australian telecommunications company over its FY17 earnings falling well short of guidance by around $64 million.
Vocus today announced it had been served with a class action proceeding filed by Slater & Gordon (ASX: SGH) in the Federal Court of Australia, which it intends to defend.
The filing is on behalf of investors who acquired Vocus shares from 29 November 2016 to the close of trade on 2 May 2017.
"The Statement of Claim includes allegations of contraventions of the Corporations Act 2001 (Cth) in relation to misleading or deceptive conduct and continuous disclosure obligations in respect of Vocus' FY17 earnings guidance," Vocus said.
On 29 November 2016, Vocus announced its FY17 underlying EBITDA guidance of between $430 million and $450 million, but the result ended up as $366.4 million.
Because of heavy writedowns on goodwill for its acquisitions, the Sydney-based company went from notching a $64.1 million profit the previous year to a whopping $1.47 billion loss in FY17.
The disappointing result led the company withhold paying a dividend and prompted the resignation of chairman at the time, David Spence.
Spence's replacement Vaughan Bowen apologised to shareholders for a difficult year he described as an "exceptionally tense time".
"The short-term pain Vocus has experienced and, in turn, forced our shareholders to experience, is something we apologise for without reservation," Bowen said at the AGM.
"We state our commitment to restoring shareholder value as our priority, above all else," he said.
At the time, Vocus shares were languishing around $2.80 per security and they are now worth $3.97, but that is still far below the $5.67 mark before Vocus announced its FY17 guidance in November 2016.
A potential class action was originally slated in September 2017, when the law firm announced it was investigating a class action against Vocus on behalf of thousands of mum-and-dad and institutional shareholders.
Slater & Gordon lawyer Mathew Chuk alleged Australia's fourth-largest telco had acted dishonestly and in a misleading manner.
"When Vocus issued its FY17 guidance, it stated that it expected to gain efficiencies by bringing these businesses together, but we allege this was done without proper visibility of profitability," Chuk said.
Investor Claim Partner Pty Ltd, ICP Capital Pty Ltd and Woodsford Litigation Funding Limited are providing litigation funding in relation to the proceeding.
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