Investment Matters

What matters this week: a torrent of results

The bulk of company results for the 30-Jun-17 period is now out.  There are some stragglers releasing next week (official deadline is 31-Aug).  In coming weeks, Investment Matters will provide our usual profit reporting season wrap-up.

As per last week, the question is where to begin.  Let's consider what happened each day...

Monday (XAO -0.32%)

The week started with a triple whammy for the steel producer Bluescope - the retirement of the loved CEO Paul O'Malley, the company is under investigation by Australia's competition regulator (ACCC) for cartel behaviour, and a week outlook for H1 FY-18.  Share price -21.8%.  It's FY-17 result was lost with everything else going on - underlying profit increased 112% over FY-16, in line with expectations, with a strong balance sheet.

The other share price fall of note on Monday was Vocus, -14.6%.  Two private equity players had flagged they were interested in acquiring the communications company (with a greatly troubled past).  On Monday it announced the two suitors didn't like what they found in due diligence, and thus walked away.  And to make matters worse, it flagged results for FY-17 would be below the previous guidance range released by the company (results were subsequently released on Wednesday).

nib is continuing its golden run in the health insurance market, in contrast to its larger competitor Medibank.  FY-17 underlying earnings increased 16.4%, with above-market growth in policyholders, claims expense under control, and doing good things in relation to technology and efficiency.  G8 Education (childcare) also released a good result; ahead of expectations, profit increased 5.2% for H1 FY-17 as compared to H1 FY-16.

Fortescue Metals (founded by Andrew "Twiggy" Forrest) released a stellar result.  As per the major resource companies, commodity prices (iron ore for Fortescue) drove an increase in revenue and profit.  Fortescue has gone from high debt and operating costs to a strong balance sheet and a production cost that is on par with Rio Tinto (and below BHP).

And to finish the day, I struggle to understand the love that the market has for Brambles.  FY-17 revenue was up a little, but underlying profit fell 18%.   The pallet business remains under pressure in its core US market.  Further impairments were also incurred.  Perhaps the market is falling out of love with this one too...

Tuesday (XAO +0.43%)

International packaging company Amcor started Tuesday with happiness.  FY-17 results were in line with expectations (profit +4.5%, or +9.6% on a constant currency basis), and the company was upbeat about the future including in relation to Amazon's potential impact on the business, opportunities for acquisitions, and the outlook for earnings growth.

The market is going to be truly shocked one day - when Corporate Travel actually disappoints with its results.  It wasn't this week though.  Underlying profit increased 42% (excluding acquisition amortisation), assisted by acquisitions, as well as increased market share and organic growth.  Further strong earnings growth is forecast for FY-18.

Oil Search (oil and gas producer in PNG, including LNG) H1 FY-17 results were a little ahead of expectations, with an increased dividend.   It was assisted in part by a higher realised oil price.  Expectations for the remainder of FY-17 were generally upgraded.

Those pampered pooches are flowing through to profit.  Vet clinics and pet shop retailer (Petbarn) Greencross released a result showing good like-for-like sales growth, in both clinic and retailing, along with continued revenue and profit growth (the latter +21% FY-17 versus FY-16).  The company also showed a positive start to FY-18, with good trading conditions.

Murray Goulburn released a 14.5% fall in profit (and with one-off costs and impairments a statutory $371m loss).    FY-18 milk intake is expected to be an enormous 26% lower than FY-17, following the debacle of the retrospective milk price cuts.  It is quite sad to see the once great co-op not thrive - in fact, the opposite - as a listed entity.  It has now effectively put itself up for sale.

Wednesday (XAO -0.21%)

But it is not all bad for the dairy producers out there.  The new Blackmores, a2 Milk released a result showing exceptional growth - revenue +56% vs FY-16, and profit +198%.   Booming demand for its baby formula in China is driving growth.

Australia's second largest private hospital operator Healthscope released a disappointing result - operating profit fell 5.6% with disappointing performance and higher depreciation charges in their hospital division, and no earnings growth forecast for FY-18.  Currency impacted the Asian pathology division

IAG Insurance released a result which did not justify its high share price.  It was a slightly better than consensus, but FY-18 guidance was moderate. 

Then the much anticipated Woolworths result.  It is clearly the current winner in the Coles vs Woolworth race in relation to sales momentum. The pimple in the result was Big W.  But we found it hard to get too excited, with earnings and EPS declines (and that's continuing operations before significant items, i.e. on a more look through basis), and its share price is expensive.

Thursday (XAO +0.15%)

FlightCentre announced that its profit fell 5.6% year-on-year.  As well it is going to reduce costs and increase sales = higher profit.  Hmmm, 101.  But the market liked it: +10.7%.  Profit was at the top end of the latest guidance (which has bounced around like a plane in cross wind). 

Fund manager Perpetual grew earnings 3.9%, with Private and Corporate Trust (corporate trust services) driving the growth. 

Nine Entertainment is paddling like a duck but achieved flat results in a difficult free TV market.  It is doing well in relation to ratings, but the paddling continues.

Santos (debt laden oil and gas producer) has made significant progress on its turnaround.   Profit was US$156m for H1 FY-17 (versus a loss pcp), with large added impairment losses.  Still, a long way to go though. 

Village Roadshow's (operator of theme parks in Queensland) results were down, impacted by sentiment from its competitor Ardent Leisure following the Dreamworld incident.

Friday (XAO -0.19% at ~midday)

Super Retail (Supercheap, Ray's Outdoors, Rebel Sport and others) is showing itself as a quality retailer in a tough retail environment.  Sales increased 4.1% on a like-for-like basis, and profit was up 25%.   The market liked it too: share price +8.6% this morning.

(Please note that the list of results above is by no means exhaustive - more the ones that were of significance or sparked our interest.)