Earnings season is now in full gear, so get your roundup here at MacroBusiness for Week 2, with this post updated daily throughout the week – look on the sidebar for easy access.
In the Week 1 Roundup we saw quite a few majors starting off the earnings season, including BHP-Billiton, (BHP) Rio Tinto (RIO) and Telstra (TLS), and National Australia Bank (NAB) provided an update, whilst Macquarie Group (MQG) surprised with a profit downgrade.
Here’s the round up of Week 2’s results:
Adelaide Brighton – ABC
The cement and lime producer Adelaide Brighton (ABC) announced full year results to the market today, coming up with a 2% drop in net profit over last year, even though revenue and earnings (before interest and tax) increased by around 3%, the effect was mainly due to a higher tax rate.
The company was able to offset broad weakness in the residential construction sector with mining project work in SA and WA, and was buoyed by the high AUD on import margins.
The presentation had an interesting graph of concrete demand in Australia, showing a downturn of 15% over the last 15 months:
The final dividend was unchanged on last year at 9 cents per share, equating to a 5.6% fully franked yield at today’s closing price of $2.94 per share only down 0.3% compared to the market.
Compare the concrete price to the share price over the same period:
AMP Ltd – AMP
Financial services giant AMP reported a 11% drop in net profit, even though underlying profit was up over 20%, it was hammered by the digesting of its merger with AXA and the correction in risk markets throughout 2011.
This merger is so far proving to be a poor performer for shareholders, as Return on Equity (ROE) has slumped from a very good 26% to an average 15.1%, although this is early days and does include the absorption/transaction costs.
AMP announced a change in its dividend policy, with a reduction in its payout ratio from 75-85% to 70-80%, with only half franking for its final dividend which was cut slightly. At 14 cents per share, the current yield based on todays closing price of $4.29 (a fall of over 2%) is a sturdy 6.7%
AMP is facing short term resistance at its current share price and remains in a dominant downtrend:
ASX Ltd – ASX
The bourse bored the benevolent brokers with a broad result today, with profit up 2.1% over the previous half year period, on a modest increase in revenue.
ASX provided a very interesting chart in its presentation, calling the previous 30 or so months “GFC2”:
This goes some way to explain the reduction in listing revenue whilst structured products (CFD’s etc) and derivatives absorbed the loss, with daily average traded value continuing to fall.
The ASX declared an interim dividend of 92.8 cents per share, up nearly 3%, with a very large 90% payout ratio, equating to a 6.1% yield on today’s closing price, where the company finished slightly up.
Dominoes Pizza (DMP)
The fast food retailer has posted an exceptional HY profit result this morning, leading the share price up by over 8%, with net profit after tax up 23% on the previous period.
It must be remembered that DMP has a large European presence (95 million Euro or $116 million AUD vs $276 million in Aust/NZ sales) and was able to foster very robust growth across this market and locally at around 8%. Perhaps when times seem tough, pizza (and beer) is the best thing? (but not for your health)
Even in currency terms, the company did well, and margins improved both locally and in Europe.
Good news for dividend chasers, as the fully franked interim dividend was increased substantially to 13 cents per share (from 10.4 cents), equating to a 3.1% yield.
And good news for value investors, the Return on Equity (ROE) and balance sheet remains high and stable respectively, with increasing free cash-flow and organic growth.
Although I can’t stand to eat the product, as an investment it certainly is tasty, as management have provided strong guidance of 20% growth in net profit although warn of labour costs rising (except in Europe).
Here is DMP’s share price growth over the last 12 months:
DMP is in a primary uptrend with resistance at $8 per share
The Reject Shop Ltd (TRS)
Discount retailer The Reject Shop, which suffered a major setback last year due to the floods in Queensland, has bounced back with a solid profit for the first half of FY12, up 4% on the previous period at $16.6 million.
Although sales were up 6%, on a like for like comparable stores basis, they fell 1.6% although marginally improved in the second quarter, as the company grew by 10 new stores during the period.
Underlying margins improved somewhat (exarcebated by the once off cost of the floods), helped along by the high AUD, but this was offset by an increasing in costs. Nevertheless free cash-flow has improved significantly alongside net debt, continuing the strong capital management of this business.
The outlook for the small retailer at first glance looks good, with the damaged distribution centre at Ipswich coming back online, and with the general cautious consumer mood, a focus on increasing volumes of cheaper goods. Planning is progressing for the Western Australian expansion in FY13 and 13 new stores to be rolled out and preliminary planning for an online strategy (hurry up!)
In a sea of stressed retailers, the once flooded TRS seems to be a good option, although it does rely upon a high AUD (cheap imports), it has a proven ability to capture the lower end of discount retailing space.
The company gave profit guidance of $19 to 20.5 million for the full year (52 weeks), some 17 to 26% above last years profit. An interim dividend of 24 cents per share was declared, and based on the current share price – up nearly 6% today – the yield equates to 4.5% fully franked.
Classic bullish descending triangle breakout on TRS
Primary Health Care (PRY)
Primary Healthcare announced interim results today, more than doubling net profit compared to the last period, from $20.3 million to $46.3 million, in line with consensus, but the market is not happy Jan, possibly on the Federal Government’s move to means test the private healthcare rebate?
Margins were sustained and grew across most segments, medical centres (GP visits) the standout and contributing to incremental earnings growth.
PRY still has a very modest net debt to equity ratio of around 30% with reduced interest costs helping the balance sheet.
The company increased the interim dividend substantially, from 3 cents to 5 cents per share, fully franked, equating to a 3.6% dividend yield on the current share price, which is strangely down 6% in afternoon trade.
Guidance was given for reduced capital expenditure for the remaining half of FY12 and no change in expected FY12 profit at around $120 to 125 million.
Here is the last 3 years share price performance, where the price remains less than half its post-GFC high above $6 per share, maybe bottoming, but also likely to remain under political pressure for the time being:
Carsales.com (CRZ)
Carsales, the provider of internet based automotive listings, announced a significant rise in net profit for the first half of FY12, up 20% to $33 million compared to the same period a year before.
On the financial side, the company had broad increases in revenue, earnings and cash-flow all in the 20% plus range.
Operationally, CRZ said that enquiries on new cars were up 26%, with total automotive enquiries up 10% pointing to a strong, if stable year for new vehicle sales (look at The Unconventional Economist’s coverage of today’s vehicle sales numbers)
The company continues to completely dominate the online space, with 75% of all time spent by consumers look at vehicle ads on a CRZ platform.
An increased interim dividend of 11.3 cents per share was announced, bringing the current dividend yield to approx. 4.3% on the current share price after lunch, down 1% to $5.01
The company gave an upbeat outlook for the rest of FY12, with new products to come online and expect higher revenue and profit, although note the risk of competitors increasing their attention at grabbing the stonking market share from CRZ.
Here is the share price performance of CRZ, a large descending triangle with support at $4.50 (with one out of line movement during the 2011 correction):
GWA Group (GWA)
GWA Group, a manufacturer and distributor of commercial and household fittings, reported a 60% fall in net profit for the first half of FY12, mainly as a result of restructuring costs and losses from its discontinued Sebel office furniture business.
The underlying reason is the ongoing disleveraging in Australian houses, with lower building and renovation activity mainly because of lower dwelling completions:
Another business facing an earnings vice, GWA reported that it reduced its workforce by 7% and another 2% losing their jobs in the second half – or around 170 potential FIFO workers….
Revenue of $315 million was similar to last year with downbeat guidance of reduced sales of 3-6% for the second half of FY12 expected. This would translate into a 10-15% reduction in earnings (before interest and tax).
GWA declared a fully franked interim dividend of 9.5 cents a share, unchanged. This equates to a 7.8% dividend yield on today’s closing price. Don’t get too excited because it fell 6.8% today to $2.31 a share – here is the 12 month share performance:
Paladin (PDN)
The uranium miner Paladin Energy reported its first half FY12 results today, with a net loss of US$120.2 million.
The loss was mainly due to a US$133 million write down of the Kayelekera Mine assets that occurred last year.
Revenues were up some 50% to US$173.4 million, whilst costs were cut alongside deferred exploration expenditure. Uranium spot prices continued to feel the impact of the Fukushima disaster, with average price at $52.50 per pound in the October-December quarter:
No dividend was declared and production guidance of uranium oxide was downgraded from 7.4-7.9 million pounds to 7.1-7.4 million pounds.
Here is Paladin’s 12 month share price performance – one for the not so faint hearted, it fell over 5% today on the result:
JB HiFi (JBH)
Arguably one of the best retailers in the country, and hence a barometer for the more mediocre brands, JB HiFi reported a near 10% fall in profit for the first half of the financial year to $79.6 million. However because of the share buyback last year, the earnings per share has stayed steady and a larger dividend can be declared.
Sales are up over 5%, yet margins were down and business costs increasing, as revenue rose 5.5 per cent to $1.774 billion.
Looking further into the geographic composition of sales, growth in New Zealand stores sales (above 28%) was almost nominally half that of total sales in Australia (up only 4.4%) pointing to better conditions in our cousins to the east.
Online sales growth of 87 per cent was impressive, with December monthly sales rising 109 per cent year-on-year, but the company stated that:
The traditional three week post-Christmas sales period was challenging, as in our view, consumers were suffering from “promotional fatigue” and therefore did not react as well to our promotional offers as in previous years.
Although JB Hi-Fi has effectively matured as a business (having grown and opened stores in the most profitable locations) it continues to grow, with 10 new stores opening in the last six months and a total of 16 expected in the full year. It also firmly predicted sales guidance of 5% for the full year, in the face of a deleveraging consumer – a bold statement.
The company will pay an interim dividend of 49 cents per share, up one cent on last year’s payment, equating to a 6.4% fully franked dividend yield on yesterday’s closing price.
Here is JB HiFi’s share price performance over the last 12 months:
One of the country’s biggest construction firms reported underlying earnings of $272 million amidst some challenging conditions and very flat guidance for the second half of 2012. Net profit was at $340 million, in line with consensus forecasts and very recent guidance, so no real surprises there.
Interestingly, cashflow and margins have improved, although the former is down on the last period. Mining contracts were again the main drivers of Leighton’s revenue across the Contractor’s and Thiess divisions, but John Holland’s earnings with the AirportLink project did not meet expectations, with very slim margins.
The balance sheet degraded with additional gearing due to the cash outflow from the AirportLink and Victorian Desalination (which made a loss of $218 million) projects and high capital expenditure on mining, which may put pressure on its operating cashflow and hence its dividend.
The interim dividend was unchanged at 60 cents per share, although higher than consensus expectations, equating to a 5.1% fully franked yield on yesterday’s closing price.
There’s not a lot of trust around Leighton’s at the moment, and probably for good reason – additional news came to hand that the company have asked police to investigate what could be “illegal payments” in Iraqi port contracts. Add this to the debacle with its large project management and lack of long term vision, its hard not to blame them.
Here is Leighton’s share price performance over the last 12 months:
