Spotless Group is reportedly facing a class action from shareholders over allegations that the company’s financial results for the 12 months to 30 June 2015, were misleading and in breach of Spotless’ continuous disclosure obligations. 

Litigation funder IMF Bentham announced this week it will fund proceedings in the Federal Court against Spotless Group. The proposed proceedings will be conducted by William Roberts Lawyers.

IMF Bentham alleges that between the end of FY14 and the publication of the FY15 financial statements, Spotless changed its policy in relation to the capitalisation of ‘pre-contract costs’ and that this change concealed the fact that Spotless did not meet its prospectus earnings forecasts for FY15 on a like-for-like basis when applying the accounting policies used for the original forecast.

The proposed claim will allege that the change of the accounting policy and the financial impact of the change were not disclosed in the FY15 accounts as required under Australian accounting standard AASB 108.

“Although Spotless announced that it had beaten its prospectus FY 15 earnings forecasts, this does not appear to have been the case on a like-for-like basis,” said William Roberts Principal, Bill Petrovski.

“Spotless has allegedly modified an accounting policy, without disclosing the change in accordance with the accounting standards.”

[quote]”It appears that FY15 NPAT was increased by almost 25 per cent over what it would have been had the prior accounting policy been used. Spotless’ margins in FY15 also appeared to be healthier than was actually the case. Accordingly, it will be alleged that Spotless’ shares traded at an inflated price.” [/quote]

Spotless said in a statement issued to the Australian Securities Exchange that no proceedings had been served against the company.

[quote]”Spotless considers that it has at all times been in compliance with its continuous disclosure obligations and intends to vigorously defend proceedings in the event that they are commenced.”[/quote]

The claim is proposed to be brought on behalf of Spotless shareholders who acquired shares between 25 August 2015 and 1 December 2015.

IMF Bentham investment manager Ewen McNee said losses suffered by Spotless shareholders are likely to be significant.

“Spotless’ shares fell 40 per cent on 2 December 2015 after Spotless issued a trading update to the ASX reporting that its FY2016 forecast would not be achieved. To this day the share price has not recovered. Spotless shareholders who purchased shares in the relevant period may have suffered tens if not hundreds of millions of dollars of loss.”