26 Feb 08
Shares of child care company ABC Learning lost almost two-thirds of their value after a poor earnings result surprised investors.
The stock fell as much as 66 per cent to a low of $1.15 this morning, and was worth 41.43 at midday.
ABC Learning said it is in compliance with all financial convenants.
Dealers said there was talk in the market that hedge funds were shorting ABC stock on concern over its borrowings.
The company, which has expanded rapidly in the United States, said in a statement to the stock exchange that it was trading profitably and in line with its forecasts.
On its $1.4 billion syndicated bank loan, ABC said it was in compliance with all covenants. These related to shareholders funds, funding ratios and gearing ratios.
Covenants did not include a market capitalisation or share price covenant, it said, adding that it had made the statement in response to “market speculation and rumours”.
ABC on Monday reported a 42 percent fall in first-half profit to $37.1 million, but reaffirmed its forecast of 15 percent earnings growth for the full year.
It said the result reflected the seasonality of earnings contributions from its US childcare centres, where there was a bias towards the second half.
ABC Founder Eddy Groves holds a 4.3 percent stake in the company, or 20.2 million shares, according to Reuters data.
ABC also said it had no plans to issue equity for 12 months.
ABC’s shares have lost more than 80 percent of their value since last May, when Singapore state investment firm Temasek Holdings bought a 12 percent stake at $7.30 a share.
In yesterday’s results, earnings per share fell 51%, from 16.2 cents a share in 2006 to 7.9 cents a share in 2007.
But income rose 66% to more than $1.1 billion.
ABC Learning operates child care centres in the US, the UK, New Zealand and Australia.
Chief executive officer Eddy Groves said yesterday revenue and margins were improving in all areas, despite the ”heavily skewed” result.
However, he said the company was disappointed with its investment in Funtastic, a toy and clothing manufacturer.
ABC Learning will pay a fully franked interim dividend of 8 cents per share on April 4. Shareholders as of March 20 will receive the dividend.
Childcare mogul loses $45m in two hours
26 Feb 08
Childcare mogul Eddy Groves has lost more than $45 million after stock in his company slumped more than 60 percent this morning.
The Brisbane-based chain yesterday reported net profit has fallen 42 per cent a result well below analysts’ expectations.
However, the sell-off today was prompted by concerns Mr Groves, who is the owner of the Brisbane Bullets basketball team, may be forced to sell some of his stock in the company to cover margin loans.
Analysts yesterday said they also were concerned about the $1.7 billion level of debt and a major bank is believed to have $600 million of exposure to ABC.
ABC has been expanded rapidly to have more than 2300 centres across three continents – including more than 160 in greater Brisbane alone – and yesterday stunned analysts by releasing their results after the market closed and refused to speak directly to the media.
Shares were trading down $2.31 at $1.43.
ABC’s major stakeholder is the Singaporean government investment arm Temasek, with a 12.3 per cent stake, closely followed by investment bank Lazard Asset Management and the Packer family-backed Challenger Financial Services.
Former Brisbane City lord mayor Sallyanne Atkinson is the chairman and former Federal MP Larry Anthony is a board member.
The company is likely to come under scrutiny from the Australian Securities Exchange for failing to alert shareholders of the larger than expected slump in net profit.
ABC shares have been hammered over recent months on concerns ranging from its dilatory capital raisings, a slowdown in the US and hedge fund trading.
Revenues for the six months rose 66 per cent from $667.8 million to $1.1 billion. The accounts show revenues included an extra $73.3 million in fees from childcare developers to “support centres during occupancy growth”.
No such fees were earned in the previous half but ABC did highlight securing a new developers’ model last year.