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Sanne shares plunge as it cuts full-year earnings guidance

Published: 11:19 29 Jul 2019 BST

financial
Shares fell 31% in morning trading

Sanne Group PLC (LON:SNN) shares slumped after the fund administrator cut its earnings guidance due to lower margins in the first half.

The company won a record £16mln of new business in the six months to the end of June, resulting in underlying revenue growth of 13%.

However, the underlying operating margin in the period is expected to be about 26%, below previous expectations for the current year.

Sanne said margins were hit by a “disappointing lack of delivery” of operating efficiencies in the central operations teams and some “elevated overhead” spend.

“We have already taken action to address these issues and continue to implement initiatives to improve the full year outturn,” it said.

 The group expects full-year underlying operating profit margin in the region of 28% to 30%, which is less than previously estimated.

It now expects to underlying earnings per share (EPS) for the full year to miss its forecasts.

Shares fell 31% to 511p in morning trading.

Liberum maintained a 'hold' rating but cut its target price to 650p from 705p. 

"On the positive side, growth in the group’s core Alternative business is performing ahead of our expectations and new business wins (up 39% y/y) point to this trend continuing," the broker said. 

"On the negative side, the slowdown in the group’s Corporate and Private Client business is worse than feared and higher costs at the group level are dragging on margins.

"The net of these, combined with a higher tax rate, results in us cutting our 2019 EPS by 10%, meaning limited earnings growth in the current year."

 

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