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Why the Speedcast International share price was obliterated today

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The Speedcast International Ltd (ASX: SDA) share price has crashed today, down over 33% and sitting at a low of 76 cents at the close of trade.

It has been a tumultuous few days for Speedcast shares – on Monday, the SDA share price closed at $1.68, but after the company reported its 2019 half-year (1H19) earnings on Tuesday before market open, the share price had tanked over 32% by the end of trade.

The pain hasn’t stopped there, with SDA shares opening lower again today on news that a major investor has sold a large portion of shares.

What were Speedcast’s results like?

In its 1H19 results, Speedcast reported revenue growth of 17% to $357.6 million – but unfortunately that’s where the good news ended. Earnings (EBITDA) grew by 3% but net profits after tax (NPAT) were down 30.3% and ended up at $14.7 million (down from $21.1 million for 1H18). This translated into profits per share of 6.1 cents (down 75% from 8.8 cents ).

The company also reported cash outflows of $25.2 million in the half, which included outflows related to acquisition costs of Globecomm. Net debt came in at $625 million (up from $586 million in December 2018) which now puts Speedcast at a debt-to-earnings ratio of 3.6x.

What about the whale?

The whale (or significant holder of shares) was none other than Norges Bank (the Central Bank of Norway). Speedcast disclosed this morning before market open that Norges Bank had sold 3.86 million of its 17.12 million SDA shares (or 22.5% of its holding) – reducing the Bank’s voting power in the company from 7.14% to 5.53%. This is hardly a vote of confidence in the company (particularly after its earnings report) and clearly was the last straw for many investors who hit the sell button today.

Foolish Takeaway

It’s clear that Speedcast has hit a few bumps in its expansionary road and this has troubled at least one institutional investor. SDA shares might be going for a bargain right now, but this also may be for a good reason.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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