The soft trading conditions that Alesco warned about early last month continue to bedevil the Sydney-based building products and industrial group with trading conditions in the past couple of months remaining "soft".
The impact of these conditions on earnings that Alesco Corp warned about in early December became fact yesterday when the group reported a 23.2% drop in net profit.
The company said net profit fell to $9.71 million for the six months to November 30 compared with $12.65 million in the prior corresponding period.
That was on a 14% fall in first half revenues to $410.2 million.
Early last month it warned that pre-tax earnings could be down 30% and yesterday’s announcement confirmed that forecast, with news that earnings before interest, tax, amortisation and significant items from continuing businesses for the first half was $30.2 million, down 29% from the prior corresponding period.
Looking to the current half, Alesco chief executive, Justin Ryan said the company’s performance would be influenced by the housing market.
"Alesco’s second half fiscal 2010 financial performance will also continue to be influenced by the timing and pace of the recovery in the new housing and renovations markets and the impact of government stimulus into the broader construction markets," Mr Ryan said.
"While we saw signs of this market recovery in December, we remain cautious as trading in January has been softer than expected."
Alesco said profit declined as house construction and renovation levels were lower than the year before.
“Group trading for the first half of FY10 improved compared with the trading results for the continuing businesses in the second half of FY09.
"Despite this improvement, the results for the half were well down on the prior corresponding period," Mr Ryan said.
Earnings per share fell to 10.43 cents from 13.85 cents and Alesco said it expected to report full-year earnings per share of between 34 and 36 cents.
Interim dividend was set at 7 cents a share (nil for the first half of the previous year).
The shares eased 3c to $4.22 yesterday.
Alesco said it had a strong balance sheet, more than halving debt to $138.9 million from $333.9 million the year before.
That cut the company’s gearing 19.8% from 36.8%.
The fall in sales was "in line with (the) general decline in levels of market activity, reflecting both the group’s exposure to the Australian new housing and renovation sectors and, to a lesser extent, the non-residential construction sectors," Mr Ryan said.
"Despite the external market challenges, operational improvements are continuing to position Alesco’s businesses to benefit from the recovery in housing and renovation activity in Australia and New Zealand."
Earnings before interest, tax and amortisation (EBITA) at the functional and decorative products division, Alesco’s biggest by revenue, fell 23.8% to $10.4 million. The division manufactures and distributes house building products including rangehoods, laundry tubs and industrial tapes.
The construction and mining division’s EBITA dropped more than 31% to $7.2 million, garage doors and openers declined 12.7% to $11.6 million and water products and services slumped 64.9% to $3 million.
“Overheads were reduced by approximately 13% compared with the prior corresponding period due mainly to an 11% reduction in labour costs and a significant reduction in discretionary expenditure," Mr Ryan said.
“The lower Australian dollar experienced in the second half of FY09 adversely impacted earnings, particularly in the first quarter. The rise in the Australian dollar since mid 2009 is expected to assist profitability in the second half."
Online travel group Webjet produced a very different result yesterday, after a very different upgrade earlier this month.
Webjet posted a 40% increase in first half profit with rising transaction volumes signalling the company (like its bigger rival, Flight Centre), is seeing demand from Australian travellers recovering from the global financial crisis.
Earlier this month, it revealed a very sharp rise in traction volumes for the half year, sending the shares 10% higher and investors punted on higher earnings.
That turned out to be right and the online travel agent posted consolidated profit of $5.197 million for the six months to December 31, up from $3.701 million in the previous corresponding period.
Gross transaction values for the first half were $248 million, up 36.6% from $181.6 million in the previous corresponding period.
Webjet declared an interim dividend of five cents per share, up from three cents a share previously.
The shares eased a cent to $2.28.
"The transaction volumes are particularly encouraging given the global economic environment and are evidence of the continued consumer acceptance of Webjet’s high level of customer service, product offering and a carefully targeted aggressive marketing campaign as foreshadowed in the company’s previous annual report," the company said in its half year report.
The company said there were indications of a recovery in demand in the months ahead, and airline capacity was increasing.
Expectations for
