A $50 million class action lawsuit being levied against WorleyParsons has been given the all clear to proceed after an attempt by the engineering group to prevent the case going to trial were put down by the Federal Court.
Handing down his decision on an interlocutory application to halt the case made by Worley, Federal Court Justice Lindsay Foster dismissed the application, ordering the company to file a defence by February 16 before a further Federal Court hearing on February 23.
The case in question revolved around a profit downgrade in 2013 which saw Worley’s share price tumble by 26 percent on November 13 after the company announced that a previously expected profit of at least $322 million for NY 2014 would in fact come in at a lower range of between $260 million to $300 million.
The company had previously given out the more optimistic figure in August and had repeated it at its October annual meeting.
The case is being brought by investor Larry Crowley, who acquired 423 of the company’s shares on October 4 of that year (and still holds them) when they were trading at around $22 and who alleges that one or more of WorleyParson’s officers was aware at the time that there were no reasonable grounds for the forecasts.
In its defence, Worley says it provided an appropriate explanation for the downgrade when the downgrades were announced on November 23 of 2013.
In that update, the company said the revised forecasts reflected lower professional services revenue compared with the prior year especially in Australia and Canada, a delay in the benefits of a cost cutting program until the second half of 2014 and an inability of better performing businesses in the US, Southern Africa and Europe to offset the declines in Australia and Canada as expected.
At the time, the company said the impact of the anticipated decline in the Australian business had been greater than anticipated as the delivery phase of the minerals and metals business remained weak whilst the Canadian business continued to be impacted by significant project deferrals.
Worley had asked for proceedings to be halted but Foster found that the action had sufficient material to proceed in light of the proximity between the time of giving the earnings advice and the November downgrade.