oOh!media shares continued to slide yesterday (despite the rebound in the wider market) in the wake of its Monday announcement to drop its earnings guidance for the time being.
The shares slid 16.5% yesterday to end at $1.035 after slumping 20% in Monday’s brutal plunge.
That’s despite the perfectly rational reasoning behind the decision to suspend guidance for the time being – the potential financial implications of COVID-19 for the Company.
“Revenue for the year to date has been in line with the prior corresponding period. The Company’s performance in the first quarter is consistent with delivering the FY20 earnings guidance provided at the full-year results on 24 February 2020,” the company said.
But directors said the “deteriorating macroeconomic conditions and resultant market uncertainty caused by COVID-19 has made forecasting full-year revenue in the current environment difficult. This is particularly relevant for oOh! given the Company has 9 months remaining in its financial year to December 2020.”
“In accordance with its continuous disclosure obligations, oOh! therefore advises that it has withdrawn FY20 earnings guidance for the time being,” directors said.
oOh!media said it is taking “decisive action to proactively manage the business through this period and ensure it remains well-positioned for when conditions stabilise, and continues to make every effort to achieve the prior earnings guidance.”
“Capital expenditure is being re-prioritised and will be materially below the bottom of the previous guidance range of $60-$70 million. Accordingly, the Company has also withdrawn its FY20 CapEx guidance.
“Once market conditions stabilise, the Company will seek to reinstate earnings and capital expenditure guidance,” directors concluded.
There’s nothing wrong with that reasoning – there is every reason to believe the company’s revenue and earnings will be hurt – like every other company in the economy, and there is every reason to believe that the board and management will try their hardest to limit the damage.
All that makes the sell down look rather silly, but then silly has been the best way to describe the actions of many investors in the past month.
Meanwhile aged care home operator, Estia Health is another company to withdraw its current earnings guidance because of the impact – real and probable of COVID-19.
Estia cited the “ high degree of uncertainty” from the coronavirus pandemic for the decision to scrap its 2019-20 guidance.
That was despite none of its homes, residents or employees at this time “being materially affected.”
“Australia is experiencing an unprecedented public health crisis of unknown dimensions with economic and financial implications that cannot at this point be estimated,” the company said in a statement to the ASX.
“The company is continuing to monitor the COVID-19 situation closely and is planning for any further escalation,” it said.
“Our focus is on the wellbeing and safety of our staff and our frail and vulnerable residents and their families while at the same time being responsive to the community need for access to residential aged care.”
Estia shares fell nearly 8% to $1.18, despite the wider bounce in the ASX.
