Not another private equity turkey (and Thanksgiving was last week) as shares in Spotless (SPO) plunged after the cleaning and catering company issued a profit warning just 18 months after its initial public offering.
Spotless told the ASX that it now expects net profit to fall 10% in the year to June 30, 2016, compared to the 9% growth forecast by analysts (oops another miss by analysts).
The shares plunged a massive 38% at the opening to $1.35 from the $2.20 close on Tuesday. They fell as low as $1.265 a share.
"Profit growth from new business wins experienced in the second half of FY15 has slowed, reflecting tighter economic conditions and tender decisions being delayed or deferred," the statement said.
"Integration benefits and new business wins have been slower than expected."
Although Spotless said revenue will be “materially” higher in 2016 and the profit decline will be the result of one-off charges, the warning continues those concerns about private equity floats of companies they had taken private.
SPO 1Y – Spotless warns on ‘tighter economic conditions’
Spotless was a spotty performer before it was bought by private equity.
Already this week we have seen electronics retailer Dick Smith (DSH) reveal a second downgrade and $60 million stock write – down which saw the company’s shares plunge 56% on Monday.
Although they rebounded on Tuesday, the company is on a suspicion list so far as most investors are concerned and the shares are the playthings for speculators and hedge funds.
Buyout group Pacific Equity Partners (PEP) took Spotless private in 2012 at $2.71 a share ($734 million). PEP sold 51% of the company in a $1 billion ASX float in May 2014.
PEP sold the last of its shares in August 26 that year, the day after they came out of escrow.
The firm received $1.80 a share for its stock, a total of $374 million. It had earlier sold a $200 million stake in December 2014.
