The S&P/ASX 200 Index (ASX:XJO) dropped back on Thursday. The Appen Ltd (ASX:APX) share price fell around 10% after an update.
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The S&P/ASX 200 Index (ASX: XJO) fell by 0.55% today to 6,691 points.
Here are some of the highlights from the ASX:
Appen Ltd (ASX: APX)
The Appen share price fell by around 10% after giving an update today.
The AI machine learning data business said that whilst its FY20 third quarter was lower than expected, its major customers released strong third quarter results and online advertising bounced back. This, and the fact its fourth quarter revenue has historically averaged 30% of its full year results, gave Appen the confidence to maintain its market guidance up until today.
However, Appen’s November results, which have just been finalised, show that while the fourth quarter has improved compared to the third quarter, the usual ramp up it traditionally sees at this point is not occurring. Appen said that COVID-19 has disrupted and reshaped the priorities and activities of its customers, especially in California where its biggest customers are based. It has also impacted its face to face sales and customer engagement practices.
The ASX 200 share is now expecting its FY20 underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of $106 million to $109 million at the actual exchange rate of AU$1 to US$0.74 for December. This is equivalent to a guidance range of $108 million to $111 million after applying the originally assumed exchange rate of US$0.70 for the second half.
Regarding the second half, Appen said: “second half underlying EBITDA is expected to grow at 30% plus over the first half”, applying first half exchange rates to second half performance.
Appen commented its major clients are reprioritising resources towards new product areas that enhance their long-term resilience and value which is currently impacting work volumes on some large mature projects. However, management believe this product development trend is positive for the company and it’s seeing a significant increase in the number of new projects amongst it major customers, although some are early in the lifecycle.
It’s also winning new customers in markets less impacted by COVID-19, including in new business areas such as shipping, automotive, education and health care.
Appen also said the long term trends for the business are very positive and spending on artificial intelligence is growing rapidly. It’s expecting a return to strong growth rates in 2021.
Link Administration Holdings Ltd (ASX: LNK)
The Link share price went up 0.9% today after it gave an update about the SS&C Technology bid to acquire Link for $5.65 per share.
Link’s board said it has carefully considered the SS&C proposal, including obtaining advice from its financial, tax and legal advisors. It has decided the offer does not represent compelling value for shareholders on a control basis. However, the board thought it was appropriate to provide SS&C with due diligence information on a non-exclusive basis so that it can develop a proposal that may be capable of being recommended to shareholders.
The board of the ASX 200 company noted that the SS&C proposal is non-binding and indicative in nature and subject to numerous conditions, including due diligence, unanimous Link board approval and securing debt finance.
The due diligence will be provided subject to entry into an appropriate confidentiality agreement containing suitable protections for Link, including a stand-still clause.
However, Link said there can be no certainty a proposal will eventuate and shareholders don’t need to take any action.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd and Link Administration Holdings Ltd. The Motley Fool Australia has recommended Link Administration Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.