Investment Matters

Company news: Paragon Care

Australian Equities Portfolio

Paragon Care (positive impact) provided a positive update on its operations.  Not surprisingly, it has traded poorly after sold off after COVID-19 brought a halt to elective surgeries and quelled prospects of a takeover. The company’s share price regained some ground this week, up 26%. Paragon’s sales have begun to normalise with a lift of restrictions on elective surgeries.

Sales in FY-20 are now expected to be higher than previously indicated, which has warranted a normalisation of staff hours. Furthermore, the company has made good progress in realising efficiencies within its businesses, achieving an additional $2m of $8m in permanent cost savings.

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Woolworths (neutral impact) provided an update. Trading conditions remain buoyant, with sales growth continuing in the fourth quarter. We are pleased with the progress it has made online and trading of Big W. It also announced further investment in its supply chain, with plans to develop two new distribution centres by  2025. There will be some associated costs with this, as well as several other one-off items in FY-20. 

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Bapcor (positive impact) shared a positive a trading update. With an easing of restrictions, it has seen a stronger than anticipated increase in demand – particularly in May and June and expects to see revenue growth in the range of 8-10% for the year across its stores, despite the lockdown period. It sees this as a consequence of higher discretionary spending resulting from government support – a view that reflects our intuition that savings accumulating during this period may have a strong impact on consumption.

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Freedom Foods (negative impact) was put in a trading halt on Thursday. The company has identified irregularities, primarily relating to its accounting and inventory. It is too early to assess the implications and impact, however, we will provide more detail as the company updates the market over the coming weeks.