The Spotless Group Holdings Ltd (ASX: SPO) share price has been absolutely smashed today following the release of a hugely disappointing half-year result.
The facility, laundry, and linen service provider's shares fell as much as 16.5% to 79.5 cents in early trade. At the time of writing they have recovered slightly and are down 11% to 84.5 cents.
Here's what you need to know:
- Sales revenue fell 9.4% on the prior corresponding period to $1.6 billion.
- Loss after tax (including exceptional items) was $358 million.
- Net profit after tax (excluding exceptional items) fell 31.4% to $33 million.
- Loss per share of 32.6 cents.
- Interim dividend per share of 1.35 cents, down 61% on last year.
The $358 million loss was the result of a mostly non-cash impairment of $391 million resulting primarily from a contract portfolio restructure.
But excluding the impairment, things were still extremely unimpressive with net profit falling sharply to $33 million.
The poor performance of the company's Facility Services segment weighed heavily on its result. Excluding exceptional items earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 12.7% due to the loss of major contracts including one at Suncorp Stadium.
The company's Laundries segment didn't perform any better. Segment EBITDA dropped 9.7% due to margin pressure on new and existing contracts.
What now?
Whilst I'll happily acknowledge that this is a year of transition, the performance of the business overall is still worrying nonetheless.
For the full-year management expects net profit after tax (excluding exceptional items) to be between $80 million and $90 million, down from $122.2 million in FY 2016 and $142.8 million in FY 2015.
But following the poor first-half I'm reasonably sceptical that the company will be able to deliver on its guidance in the second-half.
So despite the fact that its share price has plunged 31% in the last 12 months, I wouldn't be too surprised to see it fall further. Because of this I would suggest investors stay clear of Spotless until its transition is completed successfully.
In the meantime investors might be better served with an investment in other service providers such as InvoCare Limited (ASX: IVC) and Cleanaway Waste Management Ltd (ASX: CWY).
