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Earnings per share fall at STW Communications

Marketing and communications (marcom) business STW Communications (ASX: SGN), has released its interim results. Its financial year ends 31 December and the details are unlikely to get shareholders overly excited.

The Results

  • Revenue was up 7.9% to $176 million
  • Underlying net profit after tax was up 7.2% to $19.3 million
  • Underlying earnings per share (EPS) was down 2.6% to 4.9 cents.
  • An interim dividend of 3.3 cents per share was declared which is in line with the previous year
  • Net debt and earn-out payments increased to $164.6 million from $138.5 million 6 months prior.

CEO – Mr Mike Connaghan tried to put a positive spin on STW’s achievements. He suggested that despite a sluggish economy, the firm had “delivered solid growth in the first half”. Investors who look past the top line sales number and the net profit number and instead focus on their share of those earnings – as depicted by earnings per share – are unlikely to agree with the CEO that they experienced “solid growth.”

The Outlook

While shareholders may perhaps not be overly enthused by the first half result, the outlook statement by Mr Connaghan does provide reason for shareholders to be positive. The CEO stated that “momentum across key indicators of our business gives us encouragement that full year guidance of circa 15% NPAT growth and mid-single digit EPS growth remains achievable.” To turn around a 2.6% decline in first half EPS into a mid-single digit growth number by the full year, will be a solid achievement and will no doubt put a smile on shareholders’ faces if it is achieved.

STW’s release comes on the same day that television and radio media company Southern Cross Media (ASX: SXL) reported a 9.3% fall in underlying profits to $90.8 million. With Seven West Media (ASX: SWM) also due to report in the coming days, investors will soon have a cross-section view of the media market to analyse.

Foolish takeaway

While ‘old world’ media such as newspapers face a huge uphill battle, companies such as STW are much better placed to adjust to the ‘new world’ media landscape.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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