Vocus faces possible class action

A proposed class action accuses telco Vocus of misleading conduct and breaching disclosure obligations.

Vocus CEO Geoff Horth. Pic: James Croucher

Aggrieved shareholders are planning a class action against embattled telco Vocus, accusing it of misleading and deceptive conduct and breaching disclosure obligations.

Law firm Slater and Gordon and shareholder claim management provider Investor Claim Partner said the proposed claim will be brought by potentially thousands of people who purchased Vocus shares between November 29, 2016 and May 2, 2017, including mum and dad investors and large institutional funds.

The companies allege Vocus (VOC) shares traded at prices significantly higher than their true value during that time.

Vocus revealed its preliminary financial results for the 2017 financial year in August, showing net profit after tax (NPAT) was $152.3 million below the company’s guidance.

CEO Geoff Horth said at the time that the downgrade was due to higher than forecast net finance costs and a higher effective tax rate at 33.4 per cent.

Vocus posted a full-year loss of $1.46 billion for the 2017 financial year, weighed down by the messy integration of its M2, Amcom and Nextgen Networks businesses and tougher market conditions.

“Our investigations to date suggest Vocus had unreasonable expectations about the costs involved in integrating its newly-acquired platforms and technology systems,” Slater and Gordon principal lawyer Matthew Chuk said in a statement.

“The company expanded significantly since 2015 by acquiring other businesses such as Amcom and Nextgen Networks, as well as merging with M2 Group Ltd.

“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.

“We have also identified an accounting issue relating to recognition of ongoing costs associated with the execution of long term, multimillion-dollar service contracts.”

According to ICP chief operating officer, Simon Weeks, despite the potential issues, Vocus continued to reiterate its original FY17 guidance.

“There appears to be evidence that Vocus was aware of most of these issues when the FY17 guidance was originally issued in November, thus misleading the market,” Mr Weeks said.

“Based on initial interest, VOC shareholders are perturbed by this, as it is yet another example of a listed company not following the listing rules that exist to protect shareholders.”

As The Australian reported last month Vocus is on the lookout for a new chairman, as the ailing telco gears up to offload assets to better combat the growing impact of the National Broadband Network on its margins.

The departure of chairman David Spence, who was appointed to the position by Vocus co-founder James Spenceley, who quit last October, was part of a torrid 12 months for the telco, punctuated by three significant profit downgrades and failed takeover talks.

Vocus acknowledged the announcement of a possible class action, adding: “At all times, Vocus has complied with its continuous disclosure obligations and will continue to do so.”