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Enero (ASX:EGG) share price falls despite being up over 45% in a month

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The Enero Group Ltd (ASX: EGG) share price is trading lower in late afternoon trade. This comes after the company announced that it has divested Frank PR (Frank) from its brand portfolio. At the time of writing, the marketing and communication services company’s shares are down 1.16% to $2.99.

Let’s take a look at what moved the Enero share price below the $3 barrier today.

Sale of Frank

The Enero share price is in the red after investors appear displeased with the company’s offloading of Frank.

According to its release, Enero advised that it has sold off its 75% interest in Frank. The move was a part of a management buyout. Moreover, the deal was facilitated between Enero and Frank’s management team, chair and founder, Graham Goodkind, and managing director, Alex Grier.

Together, both Mr. Goodkind and Mr. Grier hold the other remaining 25% stake in Frank.

Enero will recognise a non-cash loss of $9.5 million to $10 million from the sale of Frank. This is before the impact of income tax, after receiving a cash consideration payment of $1.5 million for the 75% interest in Frank.

In FY20, Frank delivered $9.3 million in revenue to Enero, representing 6.8% of total group net revenue. More recently, the company reported $4.3 million for the first-half of FY21, reflecting 5.3% of Enero’s total earnings.

Management commentary

Enero Group CEO Brent Scrimshaw commented on the sale. He said:

Enero continues to sharpen its focus on the core agencies of the Group in line with its strategy announced at the 2020 AGM. The Frank sale will provide additional capital to allocate to high growth opportunities across the global network of the Hotwire & Orchard brands along with BMF in Sydney, in addition to future acquisitions that accelerate capability across the Group.

Frank chair and founder Graham Goodkind added:

Enero has been a great owner, shareholder, partner and friend of Frank and the advice and support that we’ve received over the last 14 years has been tremendous.

…I am grateful to Brent Scrimshaw and the Enero board for the way in which they have conducted negotiations and wish the Group every success in the future.

About the Enero share price

Despite today’s fall, the Enero share price has accelerated over the last 12 months, gaining more than 110%. The company’s shares took off strongly at the start of last month from around the $2 mark to almost $3 today.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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