Rhipe is a cloud software licensing company that supports service providers in adopting cloud technology. The company said the increasing level of uncertainty arising from coronavirus meant it considered it appropriate to withdraw its previously announced FY20 operating profit guidance.
Rhipe said it continues to be pleased with its performance, profitability, and retention of a strong balance sheet with significant cash reserves. Nonetheless, it has cancelled its interim dividend of 1.2 cents per share. The company said this measure was precautionary and reflected a desire to maintain strong liquidity in an increasingly volatile and uncertain time.
Rhipe shares have fallen 34% from their peak of $2.42 in February and are currently trading at $1.58, which includes a 6% gain in today’s trade.
In its first half results (released in February), the company reported strong sales and revenue growth. Group sales growth was 33%, due to demand for public cloud software and infrastructure, particularly Microsoft Azure and Office365. Revenue grew by 24% due to an increasing contribution from Microsoft Azure and the company’s Asian operations, plus changes to vendor incentives and competition.
Group earnings before interest, tax, depreciation, and amortisation grew 53% year on year to $7 million, while net profit after tax grew 7% to $3.3 million. Rhipe was predicting full year profits of $16 million prior to today’s announcement.
At the end of the first half, Rhipe had $24 million cash versus $25.5 million at 30 June 2019. By cancelling the payment of the interim dividend, Rhipe will save over $1.6 million. Rhipe is among a growing number of companies that have cancelled or deferred dividend payments in the last couple of weeks.
Range of companies impacted
Qantas Airways Limited (ASX: QAN) deferred its dividend of 13.5 cents per share from April to September, and cancelled an off-market share buyback in order to preserve $150 million in cash. Flight Centre Travel Group Ltd (ASX: FLT) cancelled its interim dividend of 40 cents per share in order to save some $40.1 million
A large number of ASX shares have also withdrawn earnings guidance due to the impacts of coronavirus. Auckland International Airport Limited (ASX: AIA) withdrew guidance as New Zealand introduced strict new border controls to contain the spread of the virus. Cochlear Limited (ASX: COH) withdrew guidance as cochlear implant surgeries were deferred.
oOh!Media Ltd (ASX: OML) withdrew guidance due to the economic impacts of coronavirus on the advertising market. Seven West Media Limited (ASX: SWM) and Nine Entertainment Co Holdings Limited (ASX: NEC) did likewise.
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Kate O'Brien owns shares of Cochlear Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. The Motley Fool Australia owns shares of and has recommended Flight Centre Travel Group Limited. The Motley Fool Australia has recommended Cochlear Ltd., Nine Entertainment Co. Holdings Limited, and oOh!Media Ltd. 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.