$500m wiped from APN Outdoor market value after downgrade
Close to $500 million was wiped from the market value of APN Outdoor after it announced an earnings downgrade yesterday.
APN Outdoor chief executive Richard Herring said the fundamentals and outlook for his business remained strong after an earnings downgrade saw close to $500 million of the company’s market value wiped out, sparking concerns the industry’s golden run may have come to an end.
Outdoor advertising has been the best performing media category in the past three years as it benefited from the digitisation of billboards and signs and a growing audience while other media suffered from fragmentation.
“The reaction from the market is the reaction from the market — we focus on the business,” Mr Herring told The Australian.
“Nothing has changed in what we believe are the fundamentals driving the growth of our industry and our business.”
APN Outdoor told the market yesterday its full-year earnings before interest, tax, depreciation and amortisation were expected to hit $79 million to $84m this year, compared with previous guidance of $84m to $88m.
The outlook statement, which was included in the company’s half-year result, said revenues for the September to November period had been hit by a prolonged federal election campaign and the Rio Olympic Games, which sucked ad dollars out of the broader market.
The market savaged APN Outdoor, which had its worst trading session since listing in November 2014, as its shares closed 35.3 per cent lower at $5.33 yesterday. Rival oOh!Media, which reports its half-year result today, was caught in the crossfire with its share price plunging by 15.8 per cent to $4.70, while shares in Melbourne-based QMS Media were off by 13.1 per cent at $1.19.
Wilson Asset Management portfolio manager Matthew Haupt said there was little margin for error for expensive stocks such as APN Outdoor, which had been trading at 25 times forecast net profit before yesterday’s result.
“It’s another example of companies with high expectations and PE (high price-to-earnings multiple) getting punished extremely hard when they don’t hit their result,” he said.
“It’s the same pattern that happened in the first-half reporting season … It also goes the other way with companies that have low expectations rallying just for meeting those expectations.”
However, APN Outdoor’s half-year numbers were strong, with net profit jumping 49 per cent to $19.5m for the six months to June 30, on a 10 per cent revenue uptick to $150.6m. EBITDA was up by 31 per cent to $34.8m.
APN Outdoor will pay a fully franked interim dividend of 6.5c a share, up by 44 per cent compared with the previous corresponding period.
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