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Investors in Downer Group (ASX: DOW) subsidiary Spotless have reached a $95 million settlement of a class action against the facility services business today.
The claim began when investors lost money after Spotless downgraded its FY16 Guidance on 2 December 2015.
Class action law firm Slater and Gordon alleged Spotless had engaged in misleading and deceptive conduct when it provided its FY16 Guidance on 25 August 2015.
In giving guidance for the coming year, Spotless stated that it expected its results for the financial year ending 30 June 2016 to "materially exceed" its FY15 results.
On 2 December 2015, Spotless withdrew the FY16 Guidance, issuing the FY16 profit downgrade.
In the following days, Spotless responded to an ASX price query, and issued a market update on 9 December 2015 which sought to explain the FY16 profit downgrade.
This second trading update attributed the causes of the FY16 profit downgrade to one-off FY16 costs not being absorbed by new business wins, acquisition integration issues and underperformance and a general market conditions.
The market's reaction to the FY16 profit downgrade was severe, with Spotless' share price falling by approximately 50 per cent in the following days.
Slater and Gordon practice group leader Emma Pelka-Caven said the proceeding was less than six weeks away from going to hearing in the Federal Court before Justice Murphy.
"A settlement sum of $95 million is a reflection that this case was meritorious and Spotless recognised it as such," Pelka-Caven said.
"We are pleased to have been able to obtain this outcome for group members without the matter needing to proceed to a full hearing."
The settlement is subject to Court approval.
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