APM Shares Bounce Back: Recovery After 40% Dip on Weak Profit News

Highlights:

• APM Human Services International Ltd (ASX: APM) witnessed a 2.8% rebound in shares on Friday, recovering from a significant 40% dip following its 1H FY24 update.
• The company reports a surge in preliminary unaudited revenue to $1.14 billion but faces a 35% decline in underlying NPATA, leading to a substantial market reaction and an all-time low in share prices.
• APM attributes its weak performance to persistently low unemployment, impacting client flows and job placements, with expectations for improvement in 2H FY24 despite challenging market conditions.

APM Human Services International Ltd (ASX: APM) experienced a modest rebound, climbing 2.8% to 81 cents on Friday, following a substantial 40% decline in the wake of its 1H FY24 update. Here's a breakdown of the key developments:

1. Preliminary Unaudited Revenue and Profit Plunge:

APM reported a notable surge in preliminary unaudited revenue, reaching $1.14 billion for the six months ending December 31, compared to $853.7 million in 1H FY23. However, the underlying NPATA witnessed a sharp 35% decline, dropping from $85.4 million in 1H FY23 to $55 million in 1H FY24.

2. Market Reaction:

Investors responded strongly to the weaker profit news, leading to a staggering 40% drop in APM shares. The share price hit an all-time low of 79 cents, closing at 80 cents. This downturn is particularly striking given that the company was listed just over two years ago at $3.55 per share.

3. Factors Behind Weak Performance:

APM attributed its lackluster first-half performance to persistent low unemployment, resulting in reduced client flows into employment services programs and fewer job placements, particularly in Australia and the United Kingdom. The company also cited the impact of higher interest rates and taxes.

4. Outlook for 2H FY24:

Despite the challenging start, APM anticipates an improvement in the second half of FY24. The company notes that a second-half skew aligns with historical reporting patterns.

5. Labor Market Trends:

APM's update coincides with the sixth consecutive quarterly decline in job vacancies in Australia. While the unemployment rate has stabilized at 3.9% for both November and December, indicators suggest a tightening labor market, even as the unemployment rate has shown a gradual increase since November 2022.

In summary, APM's shares are showing signs of recovery, but challenges persist as the company navigates the impact of low unemployment and strives for improved performance in the second half of the fiscal year.

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