The MNF Group Ltd (ASX: MNF) share price fell as much as 10% in Tuesday's trade after the company reported weaker half-year earnings headlined by a 49% fall in half-year profit.
The Aussie data and communications company's share price closed down 3.29% today at $3.82 per share as half-year revenue fell 16% to $98.1 million in a difficult first half. Management revised its full-year (FY19) guidance for the group's net profit after tax (NPAT) at $11-$12 million despite the half-year NPAT coming in at just $3.1 million, while lower estimates were also recorded for adjusted NPAT, EBITDA, earnings per share and Margin.
Gross margin increased 5% on prior corresponding period (pcp) during the half in a minor positive for MNF, but a 50% decline in earnings per share to 4.18 cents per share (cps) and 51% cut in the fully-franked interim dividend to 2.10 cps were clear negatives for investors.
The company appears to be the latest victim of the downturn in the local retail margin, with its Domestic Retail segment seeing declining Gross Margin Trend as Consumer Broadband dragged on the result. Positively, the company continues to diversify its gross margin sources with MNF reviewing strategic options for its Consumer segment following ongoing weak returns.
In the Domestic Wholesale division, the company reported higher Gross Margin Trend and an increase in recurring revenue, which now makes up 77% of the segment's earnings compared to 72% in 1H18.
MNF's Global Wholesale Overview segment struggled during the half, reporting lower Gross Margin Trend and Minutes Trend despite a slight uptick in recurring revenue as a percentage of earnings.
Foolish Takeaway
Investors have demonstrated in today's sell-off that they don't have a lot of faith in management to hit its revised FY19 targets, nor its affirmed FY20 guidance ranges. I don't think there's a lot of positives for domestic retail at the moment and I'd be checking out these top growth shares that have been tipped as market beaters.
