Investment Matters

What Matters this week

It was the final week of company profit reports.  A number of the smaller companies and stragglers released their results - but, to be fair, large caps get attention from auditors first.

[Unless otherwise specified, results are in reference to the six months ending 31-Dec-17, with the prior comparable period (pcp) being the six months ending 31-Dec-16.  Also, share price % changes refer to the movement on the day of the announcement.]

Where to begin re Domino’s…  Two press releases this week haven’t changed the feeling that "trust us" just doesn’t cut it.  The trust us (x2) are 1/ the CEO wasn’t selling at the same time as the company was buying back its own shares (even though on the same day), and 2/ there are no issues or conflicts of interest regarding the many margin loans (holding Domino’s share) the CEO has.  Hmmm…

BlueScope Steel had a good H1 result of $321.1m underlying profit, with a stronger outlook for H2.  Performance (and conditions) seems to be looking up as compared to a few years ago – a credit to the company.  It is understood the US tariffs on steel (and aluminium) announced overnight will be positive overall for Bluescope given the company’s US operations, but will hurt some exports from Australia to the US.   More to come on this one…

Childcare centre operator G8 Education’s FY-17 results disappointed.  Underlying earnings were down 11.7%, with new supply (too many new child care centres in G8’s catchments) weighing on occupancy and prices.  The company is confident of a turnaround in demand for this year.  The market isn’t so convinced (share price -7.9%).

Hardly Normal (Harvey Norman) had flat (+0.8%) underlying profit for H1 profit.  Although sales figures looked okay, margins seem to be under pressure along with earnings from the company’s property investments.  Combined with the concerns some have about the opaqueness of the company’s accounts, the share price fell 12.5% (and another 3% the following day).

But all is not ill in retail land.  Fashion retailer (targeting a slightly older market) Noni B had a strong H1 result with like-for-like sales up 3%, strong revenue and underlying earnings growth, and an upbeat trading update for the start of H2.

Retail Food Group (franchisee for chains such as Donut King, Gloria Jean’s, Crust Pizza and Michel’s Patisserie) committed another oops: not lodging their accounts by the 28-Feb-18 deadline.  ASX not happy.  Trading suspended.  Until their report is released – expected today (but hasn’t been released as we go to press) – trading will remain suspended.  Also makes us a bit scared of what will be in the report when it is released…

The competition regulator (ACCC) has raised concerns about the proposed takeover of the troubled Murray Goulburn (which basically put itself up for sale) by Canadian dairy giant Saputo.  Also on the dairy front, Bega Cheese had a good H1 result, but guidance disappointed = share price -6.4%.

Qantas isn’t the only airline soaring – regional airline Regional Express had a 4.2% increase in passenger revenue and statutory profit was up 46.8% (and the share price +4.0%).  Virgin Australia has also had a strong H1 result, with the best underlying profit before tax in ten years (share price -3.9%, but +6.1% the day before release).

Ardent Leisure’s result showed a turnaround in Dreamworld’s earnings (following the Oct-16 tragedy), but margin pressure in the US operations (Main Event entertainment centre) continues to be an issue.  The balance sheet will be significantly strengthened with the proceeds from the sale of the Bowling division.

Cabcharge is responding to Uber et al by growing its taxi fleet (and investing in some technology such as apps, amazing how some competition drives real improvements to customer service).  Revenue increased, but the company remains under pressure.

Fruit and veggie producer Costa, listed in Jul-15, grew H1 revenue 9.8% and underlying profit 14.5%.  It was upbeat about the outlook, and the market was happy (+10.0%).

As this week marks the end of reporting season, next week returns to (relative) normalcy.