Blue Sky darkens on latest $60 million hit and share price freefall

Written on the 13 June 2018 by David Simmons

Blue Sky darkens on latest $60 million hit and share price freefall

After exiting a trading halt on Tuesday afternoon, shares in Blue Sky Alternative Investments (ASX: BLA) immediately went into a freefall, causing more damage to the already battered investments firm.

Shareholders continued to offload the embattled Brisbane-based company after it announced an expected $59.4 million hit to its FY18 profit.

BLA shares are currently down more than 20 per cent after reopening at $1.68 per share at 11.29am AEST on Tuesday.

Blue Sky's foreshadowed $60 million hit to annual net profits is expected to stem from its exit from a number of property managements rights businesses and regional real estate development projects.

The group went into a trading halt on Tuesday morning in anticipation of the group's latest company review and balance sheet update to the market.

Part of the review, which has now been completed, is an independent review of asset valuations.

The group says it will continue to focus on private equity, private real estate and real assets, but will exit from a number of key business areas.

Following the review, Blue Sky still has $3.4 billion of fee-earning assets under management and expects to save $3.8 million through cost reduction initiatives.

The company forecasts net cash at 30 June to be $32.3 million.

Interim managing director Kim Morison says while the profit impact of the changes being announced is disappointing the company is set to deliver on its business review.

"Going forward Blue Sky will concentrate on its three core businesses," says Morison.

"[We will] focus on delivering strong investment returns for existing mandates and funds (most of which are closed ended) to continue to grow its investment management business over the longer term."

"The review has resulted in a restructure to allow the company to focus on managing alternative asset classes that are scalable, profitable, institutional grade and demonstrate competitive advantage."

"In reshaping our business and making some tough decisions we believe that we are establishing the best platform to deliver growth for our shareholders and investors over the medium and long term."

The company says it will continue to bolster its joint venture operating platforms in US real estate development, US student accommodation and Australian and New Zealand student accommodation.

This latest business review was carried out as the company tries to recover from a share price and market capitalisation wipeout of around 80 per cent following the release of a controversial report from a US short seller in March.

The Glaucus Research report claimed Blue Sky "wildly exaggerated" its fee earning assets under management (FEAUM) and that its share price was worth just $2.56.

When the report was released BLA shares were trading at around the $11.50 mark, off an all time high of $14.99, and since then they have slumped to $2.24.

The company last week announced that KPMG is carrying out an independent valuation review of all its assets but is not advising Blue Sky on its business model or management structure and the review is part of a comprehensive review process announced last month.

Glaucus Research claimed that Blue Sky's estimate of $4 billion in FEAUM was overstated by $2.5 billion.

As the share price plunged, the fallout led to two board purges and the resignations of managing director Robert Shand, followed by chairman John Kain, along with board members Elaine Stead and Nicholas Dignam.

Veteran board member Michael Gordon resigned for health reasons.

Last month the company announced it expects its full year net profit after tax (NPAT) for 2018 to be lowered by $7 million just a week after it abandoned guidance because of the turmoil caused by the Glaucus report.

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Business News Australia

 
Author: David Simmons

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