Praemium (ASX: PPS) shares are down 35% today. The drop in PPS shares is as a result of the AGM message - which includes a fall in EBITDA for the current trading year. This is not the thing which is the headline part of the release, of course it isn’t. Which just goes to emphasise that thing we keep repeating. Always read through the whole of a release, don;t just take the headline as being the real news.
For example, from that announcement: “Internal management projections of the financial impact of the changes, once fully implemented, indicate that we should expect a material increase in the underlying EBITDA based on the current business size and mix, and assuming no material changes in our client base or market conditions. Some of this benefit is expected to arrive in the second half of this financial year and most of the benefit is expected to be realized over the next full financial year and each year thereafter.” Well, that’s great. They’re going to do things which increase underlying EBITDA!
There are other announcements about how they’ve sold off the overseas operations, they’ve paid down debt, have cash. They’re being offered all sorts of deals, none of which they have decided upon but they might on a couple and so on. All really rather good.
Praemium share price from Google Finance
Except - well, except what? There has to be some reason why the PPS share price drops 35% on the announcement of such wondrously good news, right?
“Coupled with the ongoing and relatively high rate of inflation that persists, it is expected that operating costs in this current half year will be around 10% higher than the previous half year – i.e. January to June. The oneoff, non-recurring costs are expected to amount to around $1 million over the full year. Based on the impact of these costs and the revenue margin decline mentioned earlier, we currently expect that EBITDA for the first half of FY24 will be approximately 20% lower than the corresponding half last year.”
Ah. Things are going so well that we’re going to make less money this year. And, yes, that is the lsat part of the CEO’s address to the sharehgolders. As we say, always read to the end. That’s always where the real information is - especially if the news is bad.
