Shares in Beacon Lighting Group (BLX) got hammered hard yesterday after the company produced a weak trading update and guidance for the year to June.
The shares fell by well over 30% in early trading, steadied and then eased higher to finish a rough day off 21% at $1.26.
They hit a year low of $1.18 during yesterday’s plunge as investors reacted negatively to news that sales growth had slowed in the past 10 weeks for a variety of reasons.
But before yesterday’s slump, Beacon shares had slid 21% to $1.60 from the most recent high of $2.04 hit on April 13.
BLX 1Y – Beacon outlook dims
Clearly someone knew something bad was coming, and yesterday we got confirmation that the company’s sales growth had hit a slow patch. The company told the market it is "expecting to achieve Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) for the FY2016 for the 52 weeks ending June 26, 2016 to be within the range of $28.2 million to $29.2 million, compared with $27.4 million for the corresponding period in FY2015.”
"As reported in the H1 FY2016 results presentation the Group had a positive start to the H2 FY2016 in relation to company store comparative sales, however the sales during the past 10 weeks have not met management’s expectations.
"Group sales for the first 18 weeks of H2 FY2016 have been 4.6% ahead of the corresponding period.
“Sales have been softer due to a variety of factors, including: Change in timing of the Easter break, in what is an important home renovation period; Weak consumer confidence; An increase in clearance activity by competitors in the lighting category; Reduced exposure in key advertising initiatives compared with FY2015,” the company said.
The Group is expected to report that Sales and Net Profit after Tax (NPAT) for FY2016 will exceed FY2015 “which was a year in which the Group achieved outstanding results,” according to the company.
The retailer lifted its 14-15 full year profit 43.6% to $16.9 million on a 19.3% jump in sales to $179.4 million. In the six months to last December, the company reported record sales and a record profit for the half year. Sales revenue was up 8.5% at $98.5 million while net profit jumped 22% to $11.1 million.
Clearly while the company believes net profit will top the 14-15 result, the growth oomph has gone out of the business because of the slowdown in sales in the past two and a half months. That has seen the first half surge drain away.
Beacon’s recent weak sales contrasts with recent optimism about the home renovation sector from paint company Dulux, which on Tuesday said it expects renovators to help boost its full-year profits. And last week CSR expressed cautious optimism that 2016-17 would see further improvement.
But both CSR and Dulux lifted their latest dividends cautious – by half a cent a share in both cases, a better indicator of the guarded way in which they see the rest of the year.
