Investment Matters

What Matters this week

The number of reported results this week could only be described as an avalanche.

Rather than bury readers under a thick layer of financials, we capture the high (and low) lights of the week in the gentle flurry below.

Despite falling victim to the same slowdown in advertising revenue (with display revenue down 13%), Carsales (+11.3%) rallied after results that were in line with expectations, with operating profit growing by 7% (on the back of the strong growth of Carsales Asia) and an upbeat outlook for FY-20.  In summary; “better than feared”.

Add Lendlease (+21.3%) to the "better than feared" basket, with its share price rising on a lack of increase in provisions for its soon to be offloaded Engineering and Services division.

Oil and gas producer Beach Energy (+22.0%) delivered, and then some.  Production of 29.4Mmboe beating guidance of 26-28 MMboe, with debt paid down two years ahead of expectations.

Bluescope Steel (+1.8%) announced results that were broadly in line with expectations, along with an expansion of its US-based and location advantaged North Star operations.  However, the focus was on its downgraded outlook for FY-20, with operating profit (EBIT) in the first half of FY-20 expected to be 45% lower as steel spreads compress.

Signs of a recovery in the housing market did not flow through to Beacon Lighting (+5.8%), which showed a further decline in comparative sales in Q4 of the year.  Symptoms of this were seen in a decline in gross margins, an increase in inventory and receivables, and a pullback in store roll-outs for next year.

Kogan (+20.8%) delivered a free eye exam.  The very fine print in its results presentation noted that it had not restated prior year comparative information to reflect new accounting standards adopted this year (perhaps it though its many retail investors would not notice ...). This turned a 9.6% increase in gross profit into 12.5% and a 4.2% increase in operating profit into 15.6%.

Shareholders of Ooh!Media (-30.8% since last Thursday) were muttering ooh (insert expletive) as the company's share price continued to tumble this week.  The company issued a profit warning last week, with a slowing advertising market leading to a profit downgrade of 17% (at the mid-point) even after accounting for the contribution from Adshell (recent acquisition).

Perpetual’s (+1.5%) underlying performance was the polar opposite of Magellan’s last week.  Net profit after tax was dragged down by low fund inflows and weak performance of Perpetual Investments.

Charter Hall’s (+3.2%) result produced a nice anecdote that exemplified the recent rush to REITs by Mum and Dad investors.  Funds under management grew by 31% in FY-19 (vs 17% the prior year) with funds under management for retail investors increasing by 72%.

Lastly, Monash IVF’s (-30.8%) loss of five fertility specialists caused it to shed 29% of its share price on Thursday.  The quintet is responsible for the referral of approximately 400 stimulated cycles in FY-19.  The net result: FY-20 net profit after tax is expected to be impacted in the range of $1.5m - 2.5m (FY-18 Net profit was $18.6m).