While Spotless has reported to the ASX (2 December) that its business (excluding acquisitions) continues to perform well with margins being maintained, profit growth from new business wins experienced in the second half of FY15 has slowed, reflecting tighter economic conditions and tender decisions being delayed or deferred.
That resulted in a warning to shareholders that net profit (NPAT) will be 10 percent below last year and that EBITDA will be flat year on year. In turn, Spotless shares (SPO) dropped by about 43 percent from the previous day’s (1 December) closing price of $2.20 to $1.38 a share on the morning of 2 December.
‘Recent acquisitions are contributing positively to FY16 results, however it is taking longer than anticipated to fully integrate some of these businesses and realise synergies. This is particularly the case for laundries where changes to the mix of products are requiring more restructuring than anticipated,’ stated the company.
‘It was anticipated that new business wins and recent acquisitions would off-set the impact of these items, however integration benefits and new business wins have been slower than expected.
‘The combination of these factors will mean that whilst revenue in FY16 will materially exceed FY15, EBITDA will be flat year on year, with NPAT approximately percent below last year.
‘Excluding one-off charges, FY16 EBITDA is expected to exceed FY15 by approximately 5 percent with NPAT to be flat year on year. Revenue in first half FY16 will materially exceed first half FY15, EBITDA will be flat half on half, with NPAT 15 to 20 percent below first half FY15. This is driven by the bid and acquisition transaction costs expensed in the first half of FY16 and the increased depreciation, amortisation and interest costs.’