Unfortunately for its long-suffering shareholders, the Silver Chef Limited (ASX: SIV) share price has plunged 10% to $7.20 in afternoon trade after the commercial equipment rental and financing company released its half-year results.
Key takeaways from the release include:
- Half-year revenue increased 36.8% to $137.8 million.
- Net profit after tax fell 55.4% to $4.6 million.
- Earnings per share of 12.9 cents.
- First-half earnings impacted by higher GoGetta fraud provision. Management expects a strong second-half earnings skew.
- Full-year earnings guidance in the range of $21 million to $23 million.
As was widely expected, the fraud attack on its GoGetta equipment vendors has proven material to earnings during the first-half. But even when accounting for the $2.6 million fraud provision, earnings would still be 33% lower than the prior corresponding period.
Elsewhere, investors may take comfort from a good performance from its Australian Hospitality segment. Rental asset numbers, finance lease receivables, and customer numbers all increased. Furthermore, the average contract size also increased by almost 15% to $11,873.
Pleasingly its Canada and New Zealand-based hospitality segments performed just as well.
What's next?
For the full-year, management expects earnings after tax of between $21 million and $23 million, compared to $22.4 million in FY 2016.
After such a weak first-half, the company is certainly going to have to work hard to meet its guidance. Management appears confident that improved GoGetta contract yields and improved cost management will help, as will the continued strong performance of its hospitality segment.
But judging by the market's reaction today, I think most investors are like myself and quite doubtful that the company will be able to turnaround its performance in such a short period of time.
So for this reason I would suggest investors give the embattled company a wide berth for the time being and focus on other shares in the industrials sector such as Reliance Worldwide Corporation Aus P Ltd (ASX: RWC) and Reece Ltd (ASX: REH).
