Investment Matters

What matters this week

With this being one of the biggest weeks on the markets (company profit reporting season peaks this week and next), the question is where to begin.  And how to keep it succinct.

There was the shock-horror of Telstra cutting its dividend.  Most investors who had reviewed any of the company's recent financial statements would not have been surprised (the dividend was clearly unsustainable).  But for others, it was a surprise.  And the magnitude was a bit more, and it was a bit earlier than perhaps some expected.   Shareholders, particularly of the retail variety, didn't like it one little bit: the share price hit $3.81, to be at a five year low. 

And an associated thought bubble - does this (along with the banks) herald the end of the 'yield play'???

On to the banks.  ANZ released their quarterly update, with a disturbing lack of real detail and complete inability to allow proper comparison to historical figures (I guess I shouldn't be surprised).  What can't be hidden is as per CBA last week - mortgage customers (especially investors) are being charged more, yet bad debts are going down.  Does anyone else see the inherent flaw in this?  It certainly isn't sustainable in the longer term (higher repayments = more financial stress = more defaults = higher bad debts).  Oh, and revenue fell again.  Falling revenue can only be fudged over for so long - before the flow through to the bottom line (profit) really becomes apparent. 

And the CBA finally faced up to the inevitable - the CEO Ian Narev is to 'retire' as part of the company's 'succession planning', sometime before the end of FY-18.  This follows the AUSTRAC saga (and others).

There was one real doozy in relation to the results released this week.  Domino's Pizza disappointed on many levels.  Profit missed guidance.  The growth outlook disappointed.  Operational issues abound (underpaying staff, award renegotiation). Share price -18.8% on the day of the announcement (but it did recover partially the next day).   Other names that disappointed included Seek (online recruitment) in relation to upcoming investment expenditure, Iress (technology solutions for financial markets and other financial applications) - missed H1FY-17 profit expectations, and Flexigroup (financing e.g. leasing and interest-free finance) - met FY-17 guidance just, and disappointed with its outlook.

Coal companies are back to earning super profits from digging dirt out of the ground.  Whitehaven generated a $367.2m profit (+1691% vs FY-16).

And it was coal that saved the day for Wesfarmers, with competitive pressures on Coles becoming more apparent in the finances.  The golden child Bunnings continued its stellar performance in Australia, but the sausage sizzles aren't going so well in the UK (roll out issues / costs).

With all the extraordinary and exciting announcements this week, it is easy to forget that the majority of companies are actually getting on with running their businesses and doing it quite well.  Those that generally fit this category, and released their results this week include Ansell, GPT, Computershare, CSL (but the market got a bit down [stupidly!] that the company is going to switch off its buyback and invest for future growth), Invocare (funeral home operator), Woodside, Westfield, Sonic Healthcare, Dexus (property), Stockland (property), Cochlear, Treasury Wines, Evolution Mining (gold), oOH!media and JBHiFi.