G8 Education settles Slater and Gordon shareholder class action for $46.5m

G8 Education settles Slater and Gordon shareholder class action for $46.5m

Photo: Markus Spiske via Unsplash

Slater and Gordon Lawyers has secured a $46.5 million settlement from childcare provider G8 Education (ASX: GEM) after launching a class action more than three years ago on behalf of shareholders who suffered losses from an earnings downgrade in 2017.

The class action, launched on behalf of lead plaintiffs Paul and Monika Allen, had been due to go to trial in the Victorian Supreme Court in three weeks.

While G8 says the settlement has been reached “without admission of liability”, the company concedes that a commercial settlement is “in the best interests of G8 and its shareholders”.

Slater and Gordon brought the class action against G8 following losses suffered by shareholders when the company downgraded its earnings guidance for calendar 2017 on 4 December 2017, and subsequently on 26 February 2018 when it officially announced its earnings result.

The class action alleged G8 had engaged in misleading or deceptive conduct and breached its continuous disclosure obligations based on the earnings guidance it provided the market on 23 May 2017 and 21 August 2017.

In its original statement of claim, Slater and Gordon had alleged that when G8 made its May 2017 earnings forecast it knew it faced an increase in costs as a result of regulatory changes affecting staffing levels at the time.

As such, the firm alleged that G8 knew it was unlikely to increase its occupancy rate to the level required to meet the May 2017 forecast and did not alert shareholders to that fact.  

In a joint statement, Paul and Monika Allen have described the settlement as “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 say.

The settlement is now subject to court approval.

G8 estimates the net cash impact after tax and insurance contributions from the $46.5 million settlement will be about $24.5 million.

“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,” says the Gold Coast-based company.

Slater and Gordon also reveals that the G8 class action was the first in Victoria in which the court made a “group costs order”, which was set at 27.5 per cent.

The order, made by Justice Lisa Nichols on 26 November 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.

“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,” says Slater and Gordons’s class actions senior associate Kathryn Browne.

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