G8 Education will pay $46.5m after agreeing to settle on a class action by shareholders

One of Australia’s childcare providers has agreed to a multimillion-dollar settlement, three weeks before going to trial over a class action launched by shareholders.

G8 Education operates more than 430 childcare centres across Australia.

Giant ASX-listed childcare provider G8 Education will pay out $46.5m after agreeing to settle on a class action launched by shareholders almost four years ago.

The matter was due to go to trial in three weeks’ time, Victoria’s Supreme Court. However, a settlement agreement was reached on behalf of G8 shareholders who alleged to have suffered losses after the Gold Coast-based company downgraded its forecast earnings for 2017.

In a statement to the ASX, G8 said the settlement was without admission of liability, with the board determining that a commercial settlement is in the best interests of G8 and its shareholders.

Slater and Gordon Lawyers filed the class action in late 2020 on behalf of investors who claim they lost money when G8 downgraded its earnings guidance on December 4, 2017 and when the company announced its actual earnings for 2017 on February 26, 2018.

The class action alleged G8 engaged in misleading or deceptive conduct and breached its continuous disclosure obligations based on the earnings guidance it provided the market in earlier 2017.

Lead plaintiffs Paul and Monika Allen said they were pleased that a settlement had been reached, which was “a good outcome for group members who invested in G8 shares”.

“All companies listed on the ASX should comply with their duties and obligations to disclose information that is material to the market. We are pleased with this outcome,” they said.

The G8 class action was the first in Victoria in which the court made a ‘group costs order’, at 27.5 per cent.

The order, made by Justice Lisa Nichols on November 26, 2021, allows the legal costs of the lead plaintiffs and group members to be calculated as a percentage of any award or settlement reached in the proceeding.

The settlement remains subject to Court approval, with the net cash impact to G8 after tax and insurance contributions expected to be circa $24.5m. The total full and final settlement amount agreed in respect of all of the shareholders’ claims in the class action is $46.5m.

The available indemnity from G8’s insurers and existing provisions will be applied to the settlement payment, and there will be no profit and loss impact to the Group’s expected 2024 financial results.

Slater and Gordon Class Actions senior associate Kathryn Browne said: “We are pleased to have been able to reach this outcome for group members before the matter proceeded to a trial that was expected to last seven weeks or more”.

G8 Education operates more than 430 childcare centres in Australia, with a portfolio of 21 brands. Its shares were 0.16 per cent higher at $1.25 mid-morning on Monday.