Shareholders punish Apollo for sudden profit guidance slash

Shareholders punish Apollo for sudden profit guidance slash

"Deteriorating" trading conditions are to blame for Apollo Tourism & Leisure's (ASX: ATL) slashed profit guidance.

The company expects FY19 statutory NPAT to be between $14 million and $15.5 million.

This is down from a healthy $17.5 million and $19.5 million that the company expected at the beginning of May, just 28 days ago.

While a lot can happen in a month, the sudden and severe profit slashing has proven too much for shareholders.

Apollo's shareholders have punished the RV and caravan sales company, with shares down 30.33 per cent to $0.42 per share at 11.53am AEST.

The company has blamed a variety of reasons for the profit guidance slash, mostly relating to a softer market and conditions outside of its control.

In Australia and New Zealand, Apollo says rental performance for the last two months has been lower than expected, due to softness in late booking revenues and higher operating costs in NZ.

The company says RV sales remain "challenging" in the region, but post-election sales volumes are improving.

"The results of this improved sentiment are not expected to emerge until FY20," says Apollo.

Similarly, North America is another "challenging" market for Apollo.

"As at 2 May 2019, we expected the April 2019 shortfall in ex-rental sales to be caught up in May 2019 and June 2019. As sales volumes in May 2019 trended below our earlier expectations, the Group decided to accelerate ex-rental sales at a higher discount in the USA, which will have the benefit of reducing funds employed and holding costs," says Apollo.

Brexit has copped the blame for the company's disappointing sales in Europe, and has resulted in the company holding additional RVs on fleet.

As a consequence, the lower ex-rental sales will have an impact on the group's fourth quarter results.

The search for a global CFO to reign in these losses is on. Apollo says the new CFO will be tasked with improving financial management reporting and forecasting and overseeing the financial management system upgrade project expected to be completed in FY20.

To alleviate pressure the company has announced a strategic review of its RV sales business, and it is also reviewing the carrying value of the Australian goodwill of $11.8 million, which may also have an impact on the FY19 profit.

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