The Australian share market has hit another record high on Monday.
But the same cannot be said for the IPD Group Ltd (ASX: IPG) share price, which is having a disappointing start to the week.
In morning trade, the ASX share has crashed 13% to a 52-week low of $3.63.
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Why are investors selling this ASX share?
The shares of this electrical solutions provider in energy management and automation have been sold off today after it released softer than expected earnings guidance.
According to the release, based on unaudited results for the four months ended October 2024, and management forecasts for November and December, the ASX share expects the following:
- First half revenue to exceed the prior corresponding period
- First half EBITDA of $22.5 million to $23.1 million
- First half EBIT of $19.2 million to $19.8 million
- Order Backlog up 50% to $93.1 million
As a comparison, pro forma EBITDA was $24.8 million and pro forma EBIT was $21.4 million in the prior corresponding period.
It is also worth noting that Bell Potter was forecasting EBITDA of $53.5 million for the full year, representing annual growth of 33%. IPD Group clearly has an uphill battle to deliver on this over the 12 months.
What's going on?
The ASX share's CEO, Michael Sainsbury, was pleased with the company's revenue growth in a "challenging environment."
However, he acknowledges that it would have been much stronger had it not been for longer lead times. Combined with investments in its operating cost base, this has weighed on its earnings. The CEO explains:
We are pleased to remain on track to deliver another half of revenue growth in a challenging environment. Amidst the wider macroeconomic challenges in the commercial construction sector, we have seen our order book transition from daily trade to larger and more complex orders, which typically have longer lead times and less certainty around delivery timing. This has resulted in a proportion of orders that would previously have already become invoiced Revenue now sitting in our Order Backlog.
We have made additional investments into our operating cost base to generate and deliver these additional orders, which will impact margins for 1HFY25. Our operating cost base however is well placed to service future growth. We remain excited by IPD's ongoing evolution and the continued improvements to our overall value proposition and look forward to providing more details around today's update at the Company's AGM on Tuesday, 26 November 2024.
