By NZPA
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Tuesday 12th November 2002 |
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Shareholders hastily off-loaded their stocks after Baycorp warned yesterday it expected only minor growth in earnings per share (EPS) this year, with the benefits of the 2001 merger only flowing through in later years.
Baycorp shares plunged $1.43 to close at $1.82, slashing $326 million from its market capitalisation to $414 million.
At the end of last year, Baycorp shares were trading at about $7.70.
Baycorp said a $A10 million ($NZ11.5 million) payout to settle litigation against the former head of Data Advantage would be booked as an expense, and as a significant item, in the six months to December 31 result.
Managing director Keith McLaughlin told NZPA the company released the information now partly because it had finally settled the well-flagged litigation.
Baycorp had to comply with Australian listing rules requiring continuous disclosure of anything materially affecting the company.
In addition, it meant shareholders had the information ahead of Baycorp's annual meeting on Thursday.
"I don't think there's any way to get this sort of message to the market without getting an over-reaction, and you just have to look at the last 12 months at companies that have come out with any announcement... even some companies that do exceed expectations, the market has been unkind to," he said.
The company's revenues were strong, although its operating profit would be softer, between $68-70 million from a consensus of $72.5 million.
Half-year revenues would be 12-15 percent above last year's, on a pro forma basis, while full year revenues would be 15-20 percent higher.
"On an operating level, we are not that far from what the market consensus is, within 5-6 percent," he said.
Costs in the first half would be above forecasts, largely because redundancies in positions which had been duplicated in the merger took longer than expected.
"It's less than 12 months after the merger. We embarked on a very aggressive restructuring programme," Mr McLaughlin said.
"We allowed ourselves three months, so by the time that rolled out, it flowed to August/September this year. We budgeted on the basis of not carrying duplication of head count in new financial year.
"At the end of the day we could have done it quick and dirty, but that wasn't appropriate."
In September, Baycorp said it was on target to achieve annual growth in earnings before interest, tax depreciation and amortisation of 20 percent, before benefits from the merger were counted.
Baycorp has revised growth down to 0-6 percent for the first six months, but expected growth of 23-28 percent for the year.
David Price of brokers Forsyth Barr Frater Williams said a lot of the high multiple growth stocks had come under pressure in Australian market.
However, he called today's fall in Baycorp shares a "bit of an over-reaction".
"It's a stock that's always traded on a high multiple, people are paying up for the future earnings, and they have now been scaled back a number of times," Mr Price said.
"Costs are up, and certainly when you have a lot of expectation built into a share price, when you come out and disappoint like this it does tend to have an adverse effect."
Baycorp has been punished this year after booking a June-year loss of $A299.9 million, including $A309.1 million in one-off items. It started the year at $7.65.
However, the company said the promised integration benefits of $A15 million annually, within three years of the merger, remained on track.
Baycorp Advantage was created in 2001 from a merger of New Zealand's Baycorp Holdings and Australia's Data Advantage.
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