Despite the continuing strong performance by the broader stockmarket, ABC Learning Centres, a darling for much of the past two years, has had a pretty miserable 2007.
It has fallen 20 per cent, from a high of around $8.80 at the end of 2006 to around $7.06 this week while the market has risen by well over 14 per cent. (ABC Learning hit a low of around $6.60 in March.)
Investors had fretted about the impact of the company’s rapid expansion and the rising Australian dollar on its growth plans and earnings from the US and other foreign markets.
Yesterday ABC said it had boosted its full year earnings guidance because of strong trading in the US and UK.
It now believes earnings before interest, tax, depreciation and amortisation (EBITDA) will reach between $295 million and $305 million for the 2007 financial year.
The company said the guidance had been adjusted for straight line leasing and includes a $9.8 million capital gain on the sale of its Judius business.
“This compares to the previous stated guidance of EBITDA in excess of $283 million calculated on the same basis,” it said.
ABC also confirms its earnings per share will be in the range of 36 cents to 37 cents.
“ABC’s current expectations are based on strong trading results in the USA and UK since the release of the half year report and the integration of the La Petite business in January 2007 which effectively doubled the number of centres operating in the USA,” the company’s statement to the ASX said.
Eddy Groves, ABC CEO Operations (Global) was quoted in the statement as saying: “The company’s strong first half result and its continued trading results to date affirm ABC’s strategy of consolidating its position in Australia and New Zealand while expanding into North America and the UK.
“Further details regarding the company’s performance for FY07 will be provided in August with the full year results announcement.”
The shares ended at $7.53 yesterday, up 47c.
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Meanwhile a decision is expected later today on the merger between OneSteel (OST) and Smorgon Steel (SSX) from the ACCC.
The merger proposal is expected to get the green light but the acquisition of Smorgon’s distribution business by BlueScope could be a deal sinker.
There are problems with this, most notably the product lines involved and BSL’s strong position in the Australian steel products market.
If the deal falls over because of this (and remember BSL owns 19.9 per cent of SSX), the three companies are likely to fall back on the alternate plan.
That involves SSX selling around $1.1 billion of assets to OST and leaving SSX’s distribution business listed, with BSL owning a blocking stake.
OST shares finished 3c higher at $6.54 as the market believed the deal would go through and also confidence that the Project Magnet revamp of the company’s iron ore reserves, would be a winner.
SSX shares finished at $2.54, up 6c and a long way from the $1.76 a share envisaged in the first offer back in June from OST.
