Shares of Prophecy International Holdings Limited (ASX: PRO) have been hammered this afternoon after the software business issued an earnings downgrade.
Prophecy's share price fell as much as 30.8% to $1.01 shortly after the announcement was made, reflecting a total decline of 60% since the shares peaked at $2.53 in November last year.
The company said that the trading performance for financial year 2016 would be below original guidance of $20 million in sales and $8.9 million in earnings (before interest, tax, depreciation and amortisation, or EBITDA) due to deferred sales in the third quarter.
Instead, it expects revenue to be between $15 million and $17.5 million, with EBITDA to be in the range of $5 million and $7 million.
Pleasingly, the company did note that fourth-quarter sales have already delivered an improvement compared to the third-quarter, which is important considering that the fourth quarter has traditionally been the group's strongest.
It said: "So far early FY16 Q4 sales have already bettered the Q3 start and the FY15 Q4 start, giving weight to a healthy sales position in our final quarter being achieved. Notwithstanding the slower-than-expected third quarter, year to date sales of SNARE are up 54% on last year's equivalent position."
What's more, the new revised group figures would still represent strong growth compared to the 2015 financial year. However, a downgrade of this calibre will still come as a concern for investors considering the group's early stage of growth, which would go a way towards explaining today's harsh response from the market.
