The Vocus Group Ltd (ASX: VOC) share price is flat in morning trade following an update on its class action.
At the time of writing the telco company's shares are changing hands at $2.95.
What did Vocus announce?
This morning Vocus revealed that it has reached an agreement to settle the class action commenced against it in April 2019 in the Federal Court of Australia.
According to the release, the settlement of the class action, which is without admission of any liability, is subject to Federal Court approval.
The settlement amount is $35 million inclusive of interest and costs. Vocus will contribute $3.5 million to the settlement, which will be reported as a significant item below its underlying EBITDA in FY 2020. The remainder of the settlement is fully insured.
Vocus' Board determined that the agreement to settle the class action was a commercial decision made in the best interests of the company and its shareholders.
What was the class action?
In April Vocus was served with a class action proceeding filed by Slater & Gordon Limited (ASX: SGH).
The class action was on behalf of investors who acquired an interest in Vocus shares from November 29 2016 to the close of trade on May 2 2017.
The statement of claim included allegations of contraventions of the Corporations Act 2001 in relation to misleading or deceptive conduct and continuous disclosure obligations. This was in respect of Vocus' FY 2017 earnings guidance.
On November 29 2016, Vocus provided guidance for revenue of $1.9 billion, EBITDA of $430 million to $450 million, and net profit after tax of $205 million to $215 million.
This guidance was then reiterated on February 22, before being downgraded on May 2 to revenue of $1.8 billion, EBITDA of $365 million to $375 million, and net profit after tax of $160 million to $165 million.
Slater and Gordon alleged that Vocus did not have reasonable grounds for providing its original guidance and failed to disclose various information that would have revealed and disclosed that the guidance provided for the 2017 financial year would not be achieved.
