Cleaning and catering group Spotless plans to vigorously defend any allegations it misled investors about its 2015 financial results.
Spotless is facing a possible class action with litigation funder IMF Bentham proposing to fund Federal Court proceedings against the group, alleging its 2015 results were misleading and in breach of its continuous disclosure obligations.
In a joint statement on Monday, IMF and law firm William Roberts Lawyers claim the impact of an accounting policy change wasn't disclosed in Spotless' 2015 accounts as required under Australian accounting rules.
"Although Spotless announced that it had beaten its prospectus FY15 earnings forecasts, this does not appear to have been the case on a like-for-like basis," William Roberts principal Bill Petrovski said.
He said Spotless' 2015 net profit after tax was up by almost 25 per cent over what it would have been had the previous accounting method been used, and the group's margins also appeared to be healthier than was actually the case.
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"Accordingly, it will be alleged that Spotless' shares traded at an inflated price."
Spotless on Monday said no proceedings had been served against the company.
"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," Spotless said in a brief statement.
IMF investment manager Ewen McNee said losses suffered by Spotless shareholders were likely to be significant, noting that the group's shares dropped 40 per cent on December 2, 2015, after the company warned it would miss its 2016 forecast.
"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," Mr McNee said.
The proposed legal action would be brought on behalf of Spotless shareholders, who bought shares between August 25, 2015, and December 1, 2015.
The news of possible litigation unnerved Spotless investors. The stock was down 4.75 cents, or 4.85 per cent, at 93.25 cents, in a lower Australian share market, at 1321 AEDT.
