OVH’s shares plunge after it cuts 2024 profit target

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By Alban Kacher and Olivier Sorgho

(Reuters) -OVH Groupe’s shares plunged more than 14% on Tuesday, heading for their biggest daily fall, after the French cloud services company cut its 2024 core profit target citing weaker demand in its key European market.

The company slashed its organic revenue growth forecast to 9-10% from a previous forecast of 11-13%.

CEO Michel Paulin in a press release cited “an economic context with little visibility, particularly in Europe where customers are optimising their cloud resources”.

As of 0837 GMT, OVH’s shares were down 14.2%.

Sitfel analyst Valentin-Paul Jahan attributed the share price reaction to the company’s lowered sales guidance, and the fact 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 also raised prices on its services.

OVH makes most of its sales in Europe, particularly France.

Revenue in France 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 and Christina Fincher)