OVH's shares head for worst day after it cuts 2024 target

By Alban Kacher and Olivier Sorgho

(Reuters) -Shares in French cloud services provider OVH Groupe headed for their biggest daily fall, after it cut its 2024 sales target citing weaker demand in its main European market.

The company lowered its organic revenue growth forecast to 9%-10% from a previous forecast of 11%-13%, sending its shares 15% lower by around 1000 GMT, paring losses after falling by as much as 17.2% earlier.

"Demand was weaker in Europe in the second quarter and at the start of the third quarter in March. This reflects a deterioration in the macroeconomic environment, particularly in France and Germany," Chief Finance Officer Stéphanie Besnier told Reuters.

She said the public sector was positive, although customers were buying fewer or only entry-level products, while the private segment was weaker than expected.

Sitfel analyst Valentin-Paul Jahan attributed the share price reaction to the company's lowered sales guidance, and that it did not raise its margin guidance.

"It's an issue of financial communication. I think they could have accompanied the lower sales growth outlook by slightly raising their EBITDA margin outlook," he told Reuters.

OVH said it expects an adjusted core profit margin in 2024 of over 37%, the same as its previous forecast. In the first-half, the margin expanded to 37.9%, up 2.5 percentage points from a year earlier.

The group has been implementing cost-cuts to boost profitability, and has raised the price of its services.

OVH sales are concentrated in Europe, particularly France, where revenue grew 10.1%, down from 14% a year earlier.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) grew 18.3% to 184 million euros ($196.00 million), beating the 180.3 million expected in a company-compiled analysts forecast.

The company confirmed its medium-term targets.

(Reporting by Olivier Sorgho and Alban Kacher; editing by Janane Venkatraman, Jason Neely, Christina Fincher and Barbara Lewis)