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Jumbo Interactive share price crashes 15% lower on half year update

James Mickleboro
Lottery Balls

The Jumbo Interactive Ltd (ASX: JIN) share price is on course to end the week with a disappointing decline.

In morning trade the online lottery ticket seller’s shares are down a sizeable 15% to $15.65.

Why is the Jumbo share price crashing lower?

Investors have been selling the company’s shares this morning following the release of a half year trading update.

As you might have guessed from the share price reaction, Jumbo’s performance in the first half has not been as strong as the market was expecting.

According to the release, Jumbo expects to deliver total transaction value (TTV) of $187.6 million in the first half. This represents a 27% increase on the prior corresponding period.

Management advised that this growth has been driven by an increase in customer activity on its new software platform. It is also being underpinned by the continuing trend towards online lottery play, particularly by younger demographics.

Revenue is expected to grow at a similarly solid rate. Management expects to post first half revenue of $37.8 million, up 24% on the first half of FY 2019.

Softer profit growth.

However, narrowing margins means the company’s net profit after tax is only forecast to grow 13% to $14.3 million. It is worth noting that this includes increased business development activity and one-off acquisition costs for Gatherwell Limited.

Jumbo’s CEO and Founder, Mike Veverka, said: “The large number of fresh new customers from FY19 have increased their activity which is evident in the financial results for this half. We have increased our business development activity to help achieve our ‘$1 billion by 2022’ vision and underpin long term growth.”

The chief executive also revealed that its margin compression is only going to be temporary. Its underlying EBITDA margin is expected to return to previous levels in FY 2021, with increased incremental revenue from the SaaS business segment expected by then.

The post Jumbo Interactive share price crashes 15% lower on half year update appeared first on Motley Fool Australia.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019