SGH considers that eligible shareholders may have claims against Vocus in relation to losses arising out of the company’s profit downgrade announcement for financial year ending 30 June 2017 (FY17) to the ASX on the 2 May 2017, containing the following information
- The company’s revenue for FY17 would be approximately $1.8 billion
- The company’s earnings before interest, depreciation, taxation and amortisation (EBITDA) for FY17 would be approximately $365 million - $375 million
- The company’s net profit after tax (NPAT) would be $160 million - $165 million
(Together, the FY17 Downgrade)
Background to claim
Vocus, one of Australia’s largest telecommunications companies, achieved substantial growth through a number of acquisitions over the 2015 – 2016 period. Vocus:
- Acquired Amcom, a telecommunications company with an extensive fibre network;
- Merged with M2 Group Ltd, a provider of a range of communication, utility and insurance services; and
- Acquired Nextgen Networks, one of Australia’s largest national fibre backhaul networks.
On 29 November 2016, Vocus provided the following guidance in respect of its expected financial performance for FY17 in its Annual General Meeting as follows:
- The company’s revenue would be approximately $1.9 billion
- The company’s EBITDA would be approximately $430 million - $450 million
- The company’s NPAT would be $205 million – $215 million
- The achievement of acquisition synergies in previously announced time frame was on track
At the time of releasing its first-half results for the 2017 financial year on 22 February 2017, Vocus re-iterated the FY17 Guidance.
Vocus reported that the 2 May 2017 FY17 Downgrade was a result of the following factors:
- “impact of lower than forecast billings combined with an increase in service delivery headcount in the Enterprise & Wholesale division”;
- “higher than forecast expenses in Group Services, primarily technology”;
- the revenue associated with a number of large projects included in the 2H17 forecast would be predominately recognised in future periods following an accounting review;
- “lower earnings than forecast from the Mass Market energy business following the volatility created by extreme weather events in 3QFY17”;
- “other trading variances across the Group”.
The price of VOC shares fell by approximately 27% in the trading days following the FY17 Downgrade.
On the basis of SGH’s investigations to date, we consider there may be a reasonable basis to allege that during the potential claim period, Vocus:
- on and from 29 November 2016, Vocus engaged in misleading or deceptive conduct in contravention of the Corporations Act 2001 (Cth), by providing the FY17 Guidance when it did not have reasonable grounds for doing so;
- from 29 November 2016 onward, Vocus breached its obligations of continuous disclosure, in contravention of the Corporations Act 2001 (Cth), by failing to disclose that it would not achieve the FY17 Guidance.
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