An earnings downgrade from Toll (TOL), delivered at its AGM in Melbourne yesterday brought punishment for the stock from investors with the shares losing more than 7% by the close yesterday.
A circumspect admission that recent trading conditions have been tougher than expected saw the shares slide 42 cents in afternoon trading after the AGM at 2pm, to end the day at $5.47.
Despite the admission, the company reiterated its full-year earnings guidance.
The subdued outlook for the current financial year matched sentiment heard at a number of other meetings in the past week or so.
The AGMs of energy giants, Origin (ORG) and AGL (AGK) both heard the news that the 2014-15 results will be lower for a mixture of reasons, specific to the electricity and gas sectors.
Toll though can be seen as an indicator of the pace of economic activity in a number of sectors linked by its transport operations, from retailing, to energy, retailing, beer, cars and more.
Toll chief executive Brian Kruger told the meeting that it had been a “tough start” to the new financial year, and the first quarter had been weaker than the company expected.
“We have seen trading down in a number of sectors, but particularly in the government and defence, mining and, to a lesser degree, the energy sector," he told shareholders.
Mr Kruger said a number of other market sectors that Toll competed in were challenging as a volatile macro environment piled pressure on both business and consumer confidence.
Despite the weak start, he said Toll still expects to post higher earnings this financial year.
TOL YTD – Toll off to a tough start
Last year it reported a 4% rise in earnings before interest and taxation to $444.4 million.
However, Mr Kruger emphasised that Toll would have to work hard to achieve its target because of the "lack of growth in the external environment".
“The next few months leading up to Christmas will be critical for our short-term earnings outlook," he said.
Toll will also start looking for a new chairman after incumbent, Ray Horsburgh announced that he will step down from the position within the next three years.
Mr Horsburgh is seeking re-election to the board at Toll’s annual meeting but he has advised shareholders before the voting begins that it will be his last term.
“A major priority for me will be to find a replacement as chairman and I will be looking both at existing directors as well as externally to ensure we get the best possible candidate,” he said told the meeting.
