APN Outdoor shares plunged more than 38% at one stage yesterday, despite lifting interim profit 51%. The company, a spin off from APN News and Media, saw its shares belted lower after investors were disappointed by a lowered outlook for the six months to December (the company has a calendar financial year).
The selling wave eased a little in afternoon trading and the shares ended down just over 35% at $5.33. The shares had hit a low for the day of $5.12.
APN, which houses the out-of-home advertising APN used to own, had surprised the market with a warning that revenue for the 2016 financial year was now forecast to be up by between 6% and 8%, instead of the previous forecast for a rise of 8% to 11%.
And as a result of that downgrade APN cut its expectations for growth in EBITDA (earnings before interest, tax, depreciation and amortisation) to between $79 million and $84 million, instead of the previous forecast of a range of $84 million to $88 million.
Half year net earnings jumped 51.6% to $19.5 million,while revenue was up a solid 10.4% to just over $150million – but that didn’t impress the market. EBITDA for the June half rose 31% to $34.8 million.
"Outdoor advertising momentum continued into the first half of 2016. However, our revenues and earnings are weighted to the second half of the year,” the company said in its results release yesterday
“We have seen a significant reduction in market activity in recent weeks for the September to November period which has arisen, at least in part, from a combination of an extended national election process closely followed by the Olympics,” directors explained, without satisfying investors questions.
Compounding the problem for APN is the fact that it points out that its revenues and earnings are weighted to the second half of the year.
That means the impact of the slow down will be greater on the full year performance than it would seem at first sight with the slowing growth in revenue and earnings happening in the company’s peak period.
So it’s no wonder many investors were upset by the lowered forecasts.
The company also declared a fully franked interim dividend of 6.5 cents a share, up 44% on last year, but even that wasn’t enough for unhappy investors.
