As market updates and the delivery of bad news, the effort yesterday by Melbourne-based Programmed Maintenance Services was a textbook example of what not to do.
The bad news saw a very violent reaction from investors: Programmed’s (PRG) shares fell 40% to a low of $1.03, which is an all time low.
They bounced back to $1.465, then fell again to end at $1.38, down 35c or 20.3%.
The update took more than two of four pages to explain before the bad news was reached.
Programmed announced before the market opened that its first-half earnings would be around $15-16 million before taking into account restructuring costs, against $27.3 million in the first half of the 2009 financial year.
The weaker result followed poor performances in two of the company’s operating divisions, Property and Infrastructure and Resources and Industrial.
The performance in Programmed’s property services business prompted a restructure of the division, including changing its management and getting out of the company’s loss-making painting business in the UK.
The result would have been worse but for the federal government’s stimulus program which delivered $15 million of new business.
Programmed said earnings before interest, tax and amortisation in the first half of fiscal 2011 were expected to be $15-$16 million before restructuring costs, compared with $27.3 million in the prior corresponding period.
Programmed’s financial year runs to March 31, its first half to September 30.
"This is a disappointing result, but we are expecting a stronger second half, leading to a projected second half 2011 EBITA of approximately $30 million, compared with $31.6 million in second half 2010," Programmed managing director Chris Sutherland said in a statement.
"This would result in EBITA of approximately $46 million for the full year, before restructuring costs."
This compares with earlier guidance for 2011 EBITA of $58 million.
The company however said a fully franked dividend would be paid for the first half.
"In line with the 50 per cent payout policy, this is expected to result in a fully franked interim dividend of 3 cents per share, similar to the previous corresponding period, " the company said.
The full interim results will be reported on November 25.
And a smaller mauling was handed out to share registry group Computershare which confirmed earlier guidance for a 5%-10% fall in management earnings per share for the 2011 financial year.
The shares slid 2.3%, or 24c, to $10.15, even though much of the outlook was a repeat of the bad news delivered with the 2010 earnings statement in August.
The company told yesterday’s AGM that a drop in transaction activity in the second half of 2009-10 had continued into the current financial year.
"We said in August that we anticipated (US dollar) management earnings per share being five to 10 per cent lower in financial year 2011," chief executive Stuart Crosby told the AGM.
"So far this year, our performance is tracking broadly as we expected, and so our outlook is unchanged."
Mr Crosby said pressure on margin income would continue, as interest rates remained low and hedges continued rolling off.
The Hong Kong and Indian initial public offer (IPO) pipelines were strong, but there was little other capital raising activity in most markets.
"There has been much talk of mergers and acquisitions, but nothing has come to fruition that will result in meaningful revenues for us," Mr Crosby said.
In the US, bankruptcies were at a low point in the cycle.
Other transaction revenue lines active during the first half of 2009/10, such as corporate actions, US bankruptcy administration and large mutual fund solicitation projects, remained soft.
Investors must be very nervy to trash PRG’s shares like they did yesterday, and to react the way they did to the restatement of CPU’s earlier guidance.
