Blue Sky has slashed its profit guidance and the stock is tumbling again

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  • Blue Sky has downgraded its full year underlying profit guidance to $20 million to $25 million from $34 million to $36 million
  • The company says recent negative market sentiment is likely to constrain its ability to make new investments.
  • The funds manager also announced an independent review of business processes and financial reporting.

Blue Sky, the funds manager hit by a brutal research note by a short seller, has slashed its full year earnings guidance.

Its fee-earning AUM (assets under management) guidance has been revised to $4-4.25 billion, down from $4.25-4.75 billion.

And underlying net profit after tax is now forecast at between $20 million and $25 million, down from $34-36 million

The stock immediately slumped another 14.5% when markets opened this morning, and a short time ago was down more than 20% in midday trade to $4.13.

In November last year they were trading at $14.90.

Chairman John Kain said: “The revision to fee earning AUM and underlying NPAT guidance is based on the expectation the company will now be constrained from completing new investments outside of unallocated institutional mandates.”

Blue Sky shares have halved this month since Glaucus Research announced it was shorting Blue Sky, alleging the funds manager wrongly calculated the value of assets under management and charged exorbitant fees.

Blue Sky rejected the allegations and referred the Glaucus note to the corporate regulator ASIC, saying this could be a case of market manipulation.

Blue Sky Alternative Investments today announced it will commission an independent review to enhance disclosures around financial reporting, including valuations.

The company also says it will deliver greater clarity of the breakdown of fee-earning Assets Under Management, including by asset class as well as the principles for measuring fee-earning AUM.

And Blue Sky says it will commission an independent valuation review of every asset it manages.

It will also separately report one-off upfront management fees and ongoing annual management fees in all future annual reports.

The company will also provide greater transparency on its investment performance by releasing a detailed analysis of each of Blue Sky’s exits over the last five years.

Blue Sky says “recent negative market sentiment” is likely to constrain the company’s ability to make new investments in the short term.

Kain says second half earnings will also be impacted by unbudgeted costs associated with the response to recent market events, including the costs of the upcoming independent review.

He says the board wanted to ensure the company is meeting market expectations around transparency and disclosure.

“We have listened to the market feedback and it is clear that Blue Sky has fallen short of market and shareholder expectations around transparency and disclosure,” he says.

“We are committed to making changes which will improve the business, provide greater transparency and improve shareholder value over the long term.

“As part of this, the Board is committed to an independent review which will examine Blue Sky’s risk management framework, its valuation processes, financial reporting processes and other disclosure.

“We will update shareholders in due course on progress of the review and the expected date of completion.”

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