Cleaning and catering group Spotless (SPO) has been forced to reaffirm its earnings outlook after a sharp sell-off in its stock last week saw the shares lose more than 8%.
The shares slumped 10% on Thursday, rebounded by 3.8% on Friday on bargain hunting, and then added more than 4% after the company released an answer to a query from the ASX.
It also revealed it was looking at the future ownership of its laundries business, a move some brokers say could see up to $650 million realised. That in turn has raised the possibility of a capital return to shareholders, which helped the share price rise yesterday.
In its response to the ASX query, Spotless said it could find “no explanation” for the slump, adding it still expected to report a 10% fall in its full-year profit, as indicated in February.
“Spotless affirms that, subject to economic conditions, its earnings for the financial year ending June 30 2016 are unlikely to differ materially from its previous earnings guidance as set out in Spotless’ first-half results announcements on February 23,” the group said. In its February profit report the company reaffirmed “that revenue will significantly exceed FY15 with reported EBITDA tracking flat year on year". (In other words, sales up, profit flat.)
“Taking account of tax effected significant items and increased depreciation and amortisation associated primarily with new contract mobilisations and acquisitions, reported NPAT is expected to be approximately 10% below FY15.
"Consistent with market guidance issued on 2 December last year, we consider the Company’s acquisition integration challenges to be short term. The underlying performance of the business continues to be strong,” the group said.
SPO 1Y – Spotless looking for laundries exit
Spotless added it was mulling a sale of its laundry business as part of its strategy reset, which was announced in February as its first-half profit slid 20%.
"Given interest by possible acquirers of the Laundries business, and in the context of Spotless’ strategy reset, Spotless has commenced a process to assess the potential shareholder value that could be generated by a sale of its Laundries business. The process is at an early stage and no assurance can be given that a transaction will proceed,” the group said.
Spotless shares fell from over $2 a share last November to as low as 93 cents in February after it warned of challenges incorporating acquisitions and tender losses, and forecast the lack of any profit growth in 2015-16.
Yesterday’s rise to $1.13 still leaves the stock well below the listing price of $1.60 in 2014.
