Comprehensive August 2020 Reporting Season Guide

Reporting Season Jan 7, 2020 / Reading Time: 24 mins
By Conrad Song Reading Time: 24 mins

August 2020 Reporting Season

August 2020 reporting season was one of the most unpredictable earnings seasons in history, with investors finally witnessing the full impact of COVID-19 on corporate earnings. Going into reporting season, analysts were fairly pessimistic on the aggregate results, with the markets expecting Aussie companies to decline by 17% in earnings. A total of 42.5% of companies in the ASX 300 index beat estimates, while 43.0% missed expectations. This suggests that market estimates largely missed the mark, with only 14.5% of companies in-line with expectations. The large discrepancy between market expectations and actual results also led to a significant change in FY21 revision, with 45.3% of companies receiving an upgrade while 54.7% of companies in the ASX 300 index were guided downwards by analysts. An interesting observation to note is the strength of Consumer Discretionary (CD) companies this reporting season, with 59.1% of CD companies beating expectations and 52.4% of companies in the discretionary space provided with an FY21 earnings guidance upgrade.

Source: Refinitiv Eikon

Another aspect of the reporting season that was heavily anticipated was the dividend figures. About 52.9% of companies cut or reduced their dividends, while 12.4% of companies did not change their dividend and only 34.6% of companies increase their dividend payments. It appears that the market is not expecting a huge improvement in dividend payments over the next year, with a general downbeat sentiment reflected in an FY21 dividend guidance downgrade for 54.1% of companies.

 

Source: Refinitiv Eikon

Forward-looking statements or guidance were also notably absent from this reporting season, with only around 20% of companies providing expected figures for FY21. The alternating sequence of lockdowns and restriction easing across the different states in Australia over the past few months, as well as direct COVID impacts have undoubtedly led to immense uncertainty for business operations in the next year. Interestingly enough, despite all the action that went on in August, the S&P/ASX 200 index finished the month fairly flat, only up by 2.2% for the month.

Nanosonics Limited (NAN.ASX)

Maqro Adviser Video Commentary

Summary:

Overall, NAN missed expectations, with the weakness in earnings attributed to a low Q4 growth (driven by reduction in range of healthcare procedures and limited hospital access due to COVID-19). Based on the composition of revenue growth in Q4, we observe that it is largely affected by reduction in units purchased by GE Healthcare and delay in capital sales to customer due to COVID-19 impacts. NAN expects Trophon capital sales to continue to be affected in North America due to limited hospital access. (this has been the experience to date in FY21). This could also impact capital equipment requirements of GE Healthcare (main North American distributor partner). The commercial launch of the next generation product is also delayed until FY22.

Source: Refinitiv Eikon

Key metrics:

The overall revenue growth was impacted by a stagnant Q4 growth. Capital Revenue dropped significantly more in Q4 (by 34%), but overall revenue was supported by consumables/services revenue (which grew by 29% in Q4).

RegionInstalled BasePerentage IncreaseFirst 3 Quarters Increase Compared with First 3 Quarters of FY19
North America20,99013%"In line with expectations"
Europe and Middle East1,12027%37%
Asia Pacific1,6109%56%

Outlook:

Other than operating expenses expected to be in the range of $75m – $78m, no other specific guidance was provided for FY21. H1FY21 Trophon capital sales are impacted by limited hospital access, particularly in North America, largely due to:

  • Flow on effect to Capital Equipment requirements of main NA distributor: GE Healthcare.
  • Delay of sales of Trophon to GE Healthcare due to delayed sales in Q4FY2020 (on ending inventory), coupled with hospital restrictions.

Risk of ultrasound procedures decreasing due to implementations of new restrictions – sales of consumables likely to be impacted (just like Q4FY2020) despite consumable sales recovering back to 80% of sales of Q1 – Q3. The commercial launch of the next generation product is also delayed until FY22.

Product goals:
  • Increased investments in R&D, regional infrastructure and operational capability to support global operations.
  • Continued growth in Trophon installed base across all regions.
  • Growth in upgrades to Trophon EPR to Trophon 2.
  • Japan to become important contributor to global installed base.
  • Efforts to expand into China

Commonwealth Bank of Australia (CBA.ASX)

Summary:

Overall, the results were slightly mixed, with its earnings miss due to a higher than expected costs, but a 98c dividend presents a significant beat in market expectations. Loss loans provisions were also lower than expected. Other brokers noted that CBA is also trading well above peers by book value despite ongoing risk provided by heavy retail banking exposure. Despite this, CBA’s capital position leads the sector.

 

CBAActualMarket Estimate% Difference
Loss loan provisions$2,518,000,000$3,044,000,000-17.28%
Net Interest Margin2.07%2.07%0.00%
CET111.60%11.79%-1.61%
Source: Refinitiv Eikon

Outlook:

No specifics for the future mentioned, CBA anticipates that lower credit growth and low-interest rates will continue to put pressure on their revenue, which will require a focus on performance, efficiency and capital allocation. It will continue to focus on retail, business and digital banking.

Magellan Financial Group (MFG.ASX)

Summary:

Overall, a slight beat relative to expectations, with earnings exceeding expectations by around 1% and dividend in line with an expected 16% growth. It also announced a series of new products, involving restructuring retail global equities products by consolidating multiple global funds into a single global fund, leaving both open-ended and closed-ended offerings. MFG has seen a strong FUM inflow in the past few years, especially recently despite the market sell-off and uncertainties. MFG remains one of the stronger players in the industry.

Source: Refinitiv Eikon

Specific metrics:

Funds Under Management:

    • Retail FUM= $26.8bn (vs $23.2bn in 2019)
    • Institutional FUM= $70.4bn (vs $63.5bn in 2019)
    • Total Average FUM= $97.2bn (vs 86.7bn in 2019)

Management and Services fees = $591.6m (+25% from 2019)

    • 85.4% of revenue is management and services fees

Fund Performance:


Outlook:

The MFG Group has decided to freeze salaries and Director fees in the coming financial year and will also pill back on current year staff bonuses. Chairman Hamish Douglas and CEO Brett Cairns have waived their current year bonus entitlements in full. MFG expects Funds Management business expenses in FY21 to be $110-$115 million (~3.6% decrease from FY20), as a result of no bonus deferral for FY20 and no outstanding deferred bonuses paid out in FY20.

Telstra Limited (TLS.ASX)

Summary:

Overall, TLS missed expectations for its earnings, with its dividend in-line with estimates. COVID has so far caused a net negative impact of $200m, but management expects further downside, providing a $400m EBITDA downgrade of $400m from continued COVID impacts. Trends for the mobile division was unexpected weaker, largely impacted by no overseas travel.

Source: Refinitiv Eikon

Outlook:

Management expects further downside from COVID-19 impact. Guidance for FY21, underlying EBITDA estimated negative impact from COVID in FY21 of approx. $400m.

Evolution Mining (EVN.ASX)

Summary:

Overall, EVN’s results slightly beat market expectations, with the dividend much larger than expected. However, its forward guidance was not as positive as they expect a lower production and higher costs in FY21 and FY22. EVN also expects higher capex figures over the next three years.

Source: Refinitiv Eikon

Outlook:

Cowal and Red Lake are expected to drive significant organic growth, with the potential for larger and longer-life operations at Red Lake. The group gold production and cost for FY21-FY23:

FY21 – 670,000 to 730,000 ounces at an AISC of A$1,240 to A$1,300 per ounce

FY22 – 700,000 to 770,000 ounces at an AISC of A$1,220 to A$1,280 per ounce

FY23 – 790,000 to 850,000 ounces at an AISC of A$1,125 to A$1,185 per ounce

AGL Limited (AGL.ASX)

Summary:

Overall, AGL’s results were largely in-line with expectations, with revenue missing slightly but earnings and dividends coming in larger than expected. However, the highlight was its steep drop in FY21 guidance (AGL forecasts a 30% decline in earnings) but intends to pay special dividends throughout FY21 and FY22 (albeit having the temporary removal of franking during this period).

Source: Refinitiv Eikon

Key metrics:

Statutory profit after tax was boosted by the mark-to-market of hedging instruments as wholesale prices feel, though underlying profit after tax was down 22% due to the major unplanned outage at AGL Loy Loy in the past year, lower wholesale energy prices and higher depreciation prices of the thermal asset fleet. Management also cited issues of lower electricity prices and gas contract terminations, with the electricity price cycle at a low and a longer path to recovery.


Outlook:

Guidance for underlying profit after tax if $560-$660m, with uncertainty about trading conditions helping to cloud the outlook. COVID is accelerating pre-existing operating headwinds from maturing gas contracts and it is seeing falls in wholesale prices. These headwinds have been well documented and aren’t a surprise to AGL, though they have been that timeline has been pushed ahead of schedule.

COVID would continue to result in additional cost impacts (especially higher credit losses as a result of hardship endured by customers. The guidance for FY21 assumes additional net bad debt expense will be $40 million, though AGL acknowledges that the actual number could be higher or lower depending on economic conditions and the continued length and scale of the COVID pandemic. AGL still has good cash flow and a strong financial position which gives it room to invest in the business and to support growth and capital management initiatives.

Baby Bunting Group (BBN.ASX)

Summary:

Overall, BBN’s earnings and dividends were ahead of estimates, with sales in the first six weeks of FY21 delivering outstanding results despite the lockdown in Melbourne. BBN now targets 4-6 new stores in FY21 and potential expansion into New Zealand.

Source: Refinitiv Eikon

Outlook:

Comparable store sales growth for the first 6 weeks of 2H was 20%. Melbourne stores remain open however there has been some sales moderation in Melbourne. Excluding Victoria, comparable sales growth was 28.7% (as of 9 Aug 2020). They anticipate opening 4-6 new stores in FY21, with 3 new stores in 1H21. No guidance on earnings given at this point.

JB Hi-Fi Limited (JBH.ASX)

Summary:

Overall JBH’s earnings beat expectations, with its dividend significantly ahead of estimates. Management also noted an acceleration in sales for the first few weeks in FY21.

Source: Refinitiv Eikon

Outlook:

Although no specific guidance is given for FY21 due to uncertainties for its product demand, it has noted a stellar growth in the first few weeks of FY21.

FY21 Trading Update:

    • 46 JB Hi-Fi stores and 21 The Good Guys stores temporarily closed in Melbourne as a result of stage 4 restrictions/lockdown (min period of 6 weeks)
    • 7 JB Hi-Fi stores temporarily closed in NZ (min period of 2 weeks)
    • Significant acceleration in online sales in Vic in the first 11 days following stage 4 lockdowns à resulting in strong sales growth in August to date

BHP Group (BHP.ASX)

Summary:

Overall, BHP slightly missed expectations, with its production numbers expected to decline in FY21 (last table at the bottom). The expected FY21 production decline is in-line with guidance released earlier this year. FY20 production numbers are largely in-line with previous guidance, albeit at the bottom of the range, with the exception of iron ore at the top of the range. BHP also plans to exit thermal coal and Bass Strait oil.

Source: Refinitiv Eikon

Outlook:

Outlook for 2021 remains uncertain but BHP’s base case has the world’s major economies bouncing back in 2021 after (except for China) contracting in 2020. Their base case for the world economy is 6% smaller than it would have otherwise been due to COVID. China and OECD will return to their pre-COVID trend growth rates around 2023, while developing economies outside East Asia may take longer. Looking ahead, BHP expects cost exposures for diesel, power, explosives, and steel products to remain lower than anticipated levels for some years, even if inflation period-on-period may be variable.

Commodity production:

    • Iron ore prices are expected to decline as new supply hits (including from West Africa) and demand weakens, and as such the quality of the iron will be a key factor on iron prices.
    • Metallurgical coal prices have weakened sharply on the back of weak Chinese demand and should see a recovery in the second half of FY21. Medium to long-term fundamentally attractive.
    • Energy coal prices remain challenged and long term is expected to increase at a decreased rate compared to the global population.
    • Copper prices medium term are expected to be weaker than first anticipated due to reserves decreasing slower than expected due to COVID. Demand for the metal is expected to be solid while exposure to the electrification trend provides an attractive upside. Prices will continue to rise.
    • Nickel prices will be a beneficiary of the electrification trend and has a particularly attractive mid to long-term future.
    • Crude oil prices will start to increase as mobility increases around the world, though the pace of gains is expected to be modest in the short term.
    • LNG performed poorly in H2FY20, but demand is expected to be firmer in FY21. Storage levels are high though, which decreases potential. LNG is expected to gain more share of global gas and will become attractive longer term.
    • Potash stands to benefit from a number of global megatrends (changing diets, rising population and the need for sustainable agriculture) and will see strong yearly growth through the 2020s.

Coles Group (COL.ASX)

Summary:

Overall, COL was roughly in-line with market expectations, with earnings on top of estimates but dividend falling short. COL reported substantial growth in the first six weeks of FY21, with online supermarket sales up by 60%.

Source: Refinitiv Eikon

Key metrics:


Outlook:

Sales so far in FY21 are broadly in line with expectations, with online sales in Victoria obviously a lot higher than in other states.  Inflation declined in the latter part of Q4 which decreased and has continued into Q1 FY21 with inflation broadly in-line with Q3 FY20. The decline is largely driven by grocery, dairy, frozen and non-food grocery and was offset by continued inflationary pressures in meat.

Coles has continued to incur incremental COVId-19 related costs due to the need for increased safety measures, and it means that EBIT margins are likely to be consistent with FY20 EBIT until COVID-related costs decrease. Corporate costs are expected to be above FY20 corporate costs while net earnings from property operations are expected to be more modest than FY20 and weighted towards the first half due to lower anticipated disposal activity.

Tyro Payments (TYR.ASX)

Summary:

Overall TYR missed market estimates with revenue impacted by lower merchant services fee margins. No specific guidance or outlook for FY21 given but did note that it intends to drive expansion into eCommerce and other payment types, as well as pursue any strategic M&A partnerships. Victorian lockdowns are affecting transaction value (23%), with the FY21 transaction value in Victoria so far down 1.5% pcp.

Source: Refinitiv Eikon

Key metrics:

The Transaction value for TYR increase of 15.1% to 20,131,045 in FY20. It currently has a strong liquidity position – $188.3 million in cash and investments available ($68.8 million on 30 June 2019). TYR also saw merchant acquiring bank by terminal count up by 22% and record merchant loan originations of $60.1m in the year.

CSL Limited (CSL.ASX)

Summary:

Overall, revenue and earnings in-line with expectations, dividend missed expectations. CSL expects further growth in FY21, with NPAT guiding upwards of 8% and revenue growth of 6-10% in FY21. CSL’s plasma collections remain a key risk in the near-term as impacts from COVID persist.

Source: Refinitiv Eikon

Key metrics:


Outlook:

Metrics:

    • CSL NPAT FY21 range [$2,100m – $2,265m] (up 8% from FY2020).
    • Revenue Growth ~ 6% – 10% @Constant currency rate.
    • CapEx FY2021 ~ $1.6bn

Other expectations:

    • The collection of plasma has been adversely impacted in the past few months as communities respond to shelter in place orders, extended lockdowns and other government actions.
      • CSL believes that pandemic will recede and hence continues to invest in plasma collection and manufacturing facilities as well as the hallmark R&D programs.
    • Sequrus is expected to continue to perform well and deliver another strong profitable year.
    • Multiple R&D programs and partnerships aimed at fighting COVID-19, including the areas of vaccines, monoclonal antibodies, and plasma therapies.
    • COVID-19 vaccine to be completed by 2021 if successful.
    • Paused clinical trials to recommence in FY2021.
    • Multiple initiatives underway to ensure patient supply of therapies.
    • China: Market volume demand outlook – mid to high single digits.
    • COVID-19 response and new growth initiatives to drive an uplift in investment towards the top end of the prior guidance range.

Megaport (MP1.ASX)

Summary:

Overall MP1’s results were largely in-line with expectations given its pre-released earnings figures. MP1 expects an EBITDA breakeven (on an exit run basis) in FY21. The key highlight was the new product offering (launched a week before) for Megaport Virtual Edge platform, which will extend its products to enterprise offices.

Source: Refinitiv Eikon

Key metrics:



Outlook:

MP1 aims to achieve EBITDA breakeven on an exit run basis in FY2021.

Projects planned out due to 2 capital raising across FY2020 (raised over $134m) to accelerate expansions into new locations, undertake capacity upgrades, fund innovation and internal development of new technology, and fund operating costs and general working capital requirements.

Platform Innovations & Product Focus:

    • Further API Integrations – SD WAN platforms and Network Function Virtualization

Strategy & Future Performance:

    • Connect to new locations, partners and enterprises.
    • Accelerate partner enablement to maximise sales opportunities.
    • Strengthen its position as the leading innovator in global Network as a Service.

Expansion Initiatives:

A2 Milk Company (A2M.ASX)

Summary:

Overall A2M had a slight miss relative to market expectations, but still demonstrated strong growth. However, A2M expects weaker margins in the future due to higher raw/packaging material costs, increase in marketing investment, lack of currency tailwind and 3Q20 COVID benefits not replicated in the future. We observe that near-term risks remain high amid a resurgence of Chinese brands and increasing geopolitical tensions.

Source: Refinitiv Eikon

Key metrics:

ANZ accounted for 55.79% of A2M’s revenue with NZ$965.7m, an increase of 14.6%. EBITDA was NZ$465.6.

China and Other Asia accounted for 40.40% of A2M’s revenue with NZ$699.4m, an increase of 65.1%. EBITDA was NZ$224.8.

USA accounted for 3.82% of A2M’s Revenue with NZ$66.1m, an increase of 91.2%. EBITDA was -NZ$50.5.

Outlook:

Uncertainty resulting from COVID -19 can impact consumer behaviour in core markets as well as participants within the supply chain, notably in China. A2M anticipates continued strong revenue growth supported by continued investment in marketing and organizational capability.

FY2021 EBITDA margin is expected to be in the order of 30% – 31%, reflecting:

    • Higher raw and packaging material costs, partially offset by price increases.
    • Increase in marketing investment.
    • FX benefit of prior year not expected to be replicated.
    • 3Q20 COVID-19 benefits not replicated.

FY2021 capex is currently expected to be $50m due to ERP investment and capital projects supporting fresh milk processing in Aus. A2M also targets a medium-term EBITDA margin of 30%.

Tabcorp Holdings (TAH.ASX)

Summary:

Overall, TAH’s results were in-line with estimates, with strong lottery sales (negative growth for all other segments). TAH also announced a capital raising at the same time it reported the full year results.

Source: Refinitiv Eikon

Outlook:

Retail uplift (including Trackside) planned to complete in FY21. Cost synergies on track to deliver at least $95m of annual savings in FY21 as they continue to integrate and optimise new products.

Lotteries and Keno FY21 Key Focus Areas:

    • Game Portfolio: Bigger Div. 1 prize and more weekly winders. Instant Scratch-Its to build on strong momentum.
    • Customer Experience: Enhance personalisation and continue investment in registered player infrastructure and marketing technology.
    • Distribution: Support partners during the COVID period, improve player payment options, continued focus to drive Omni-channel program performance.

Wagering and Media FY21:

    • Continued focus on integration, optimisation and personalisation.
    • Appeal to a broader and younger customer base by integrating sports content.

Webjet Limited (WEB.ASX)

Summary:

Overall, WEB missed market expectations on its revenue and earnings, reporting a larger loss than previously anticipated. WEB expects global demand to recover and its strong capital position to take advantage of it. WEB also announced its change of year end (from 30th June to 31st March) to accommodate for WebBed reporting and auditing requirements.

Source: Refinitiv Eikon

Key metrics:

 


Outlook:

WEB planned for capex reductions in FY21, as well as a deferral of FY20’s dividend from October 2020 to April next year. With the capital raising and convertible note from earlier this year, WEB will be starting FY21 with a strong capital position with significant financial and strategic flexibility.

Demand Outlook:

  • Over time, the demand for travel will continue to grow, so will spending on leisure tourism.
  • Global travel business – well positioned to pick up travel activity.
    • 75% of WebBed bookings are intra-regional and customer mix provides strong exposure to leisure markets.
    • 85% of Webjet OTA flight bookings are domestic and predominantly serves the leisure market.
    • Online Republic is primarily a leisure business – 100% of Motorhomes and more than 80% of cares are booked for leisure purposes.
  • Structural shift from offline to online is accelerating, with all business positioned to capture demand.
  • Consolidation & rationalization will occur globally.

 

Ongoing Operations:

    • WebBeds – become the global #1 b2b player.
    • Webjet OTA – increase market share leadership.
    • Online Republic – improve underlying performance.
    • Improve self-serve airline credit redemption.
    • Improved customer service messaging for cancellation and booking changes – live messaging volumes increase 300%+ in COVID-19.
    • Automation of refund processes.
    • Developing further flexible payment options for hotels.
    • Partnering with AU/NZ Tourism bodies to drive domestic tourism following easing of COVID-19 travel restrictions.

Brambles Limited (BXB.ASX)

Summary:

Overall, BXB’s results were in-line with estimates, with a disappointing dividend reduction. Cash flow has improved, and the company benefits from exposure to pallet demand for consumables. BXB expects sales revenue growth to be in the range of 0-4% in FY21 and underlying profit growth to be between 0-5%. BXB will also continue its share buy-back programme subject to ongoing assessment of funding and liquidity requirements.

Key info:

FY20 saw sales revenue growth of 6% and underlying profit increase by 4% as the global pallets business experienced strong growth and offset declines in the Automotive container and Kegstar keg-pooling businesses. ROCI remains strong (16.7%) despite 1.5% impact of AASB 16. Dividend payout ratio of 53% sits within the targeted payout ratio range of 45-60%. BXB has achieved all its key 2020 sustainability goals so far.

Smartgroup Corporation Limited (SIQ.ASX)

Summary:

Overall, SIQ’s results were in-line with expectations, with novated lease volumes recovering in June/July. It met its own expectation (provided in June) – H120 NPATA of $32.1m. 2H20 off to a positive start, but Victoria expected to be challenging. Customer segment base still stable, with employees in government, health, education and public benevolent institution segment

Key metrics:

Source: Refinitiv Eikon

 

Wesfarmers Limited (WES.ASX)

Summary:

Overall, WES beat expectations, with dividend coming in significantly higher than expected as they are paying a $0.77 final dividend along with a $0.18 special dividend from the sale of its 10% interest in Coles in March. However, they noted in their outlook that the gradual removal of government stimulus will have a negative impact on them, as well as continued pressure on Kmart and Target. Higher operating costs are also expected. Its industrial segment is also expected to be impacted by weaker energy prices and lower margins in explosive grade ammonium nitrate. Despite strong performance from Bunnings and Officeworks, the overall outlook for WES is not as positive.

Source: Refinitiv Eikon

Key metrics:


Outlook:

The continued impact of COVID-19 continues to cause significant uncertainty for the Group’s businesses. Consumers spending more time at home is likely to increase demand for some of the Group’s businesses, but this will be offset by lower retail sales and the gradual removal of government stimulus will also have a negative impact. Kmart and Target have been especially impacted through Bunnings and Officeworks have continued to deliver strong growth at a national level. Additional operating costs are expected as WES’s businesses make their stores safe for customers and employees.

WES has a strong balance sheet and is well-positioned regardless of economic conditions. The Groups’ industrial businesses will be subject to commodity prices, FOREX rates and seasonal outcomes. Demand is expected to be robust, but earnings are expected to be impacted by weaker energy prices and lower margins in explosive grade ammonium nitrate.

South32 Limited (S32.ASX)

Summary:

Overall, S32’s results were fairly in-line with guidance, with a better than expected EBITDA and DPS. A fully franked dividend of US 1 cent per share will be paid on 8 October 2020. The exit from South Africa Energy Coal business is another highlight for S32. For its FY21 production guidance, Cannington’s FY21 Guidance (silver, zinc, lead) increased by 10% and Illawarra’s Metallurgical Coal guidance decreased by 4%. Cost guidance seem to be roughly in line or slightly decreased from last year, while major project capital expenditure is projected to be 38.25% lower in FY21.

Source: Refinitiv Eikon

Key metrics:

Manganese ore price of US$4.83/dmtu for 44% manganese production

Higher volumes at:

    • Illawarra Metallurgical Coal (+US$173M) Brazil Alumina (+US$88M)
    • Cannington (+US$45M)
    • Partially offset by lower volumes at:
    • South Africa Manganese (ore -US$44M, alloy -US$20M)
    • South Africa Energy Coal (-US$104M)

Outlook:

Highlighted is Cannington’s FY21 Guidance increased by 10% and Illawarra’s Metallurgical Coal guidance decreased by 4%. Australian and South African Manganese guidance for the upcoming has been released for the first time, both at slightly higher rates than in FY20. Cost guidance seems to be roughly in line or slightly decreased from last year, while major project capital expenditure is projected to be 38.25% lower in FY21.

Qantas Airways Limited (QAN.ASX)

Summary:

Overall, QAN’s results were fairly in-line with market estimates, with a $4bn revenue impact from COVID in 2H20. Qantas has enacted a three-year recovery plan to cut costs and preserve liquidity and is targeting $15bn in savings over the next three years, including restructuring that will deliver $1bn in ongoing annual savings from FY23.

Key metrics:
    • $4 billion revenue impact from COVID crisis in 2H20
    • 8% return on invested capital (19.2% in 2019)
    • Liquidity of $4.5 billion providing considerable buffer to manage uncertainty
    • Fuel consumption was fully hedged for the second half of FY20 and 90 per cent hedged for the first half of FY21. $571 million of de-designated hedge losses in the FY20

Outlook:

Qantas has enacted a three-year recovery plan to cut costs and preserve liquidity and is targeting $15bn in savings over the next three years, including restructuring that will deliver $1bn in ongoing annual savings from FY23. Some of the measures under the recovery plan include:

    • Restructuring of benefits worth up to $2.4bn over 3 years.
    • Gross Debt Reduction of $1.75bn.
    • Return to double digit Qantas Loyalty program growth in FY22.
    • Capex for FY21 <$0.7bn.

QAN assumes that domestic operations will recover to pre-COVID levels by the end of FY21. International recovery is expected to be slower, recover 50% of pre-COVID capacity by FY22. A significant underlying loss is expected for FY21. FY21 hedging has been restructured to account for the reduction in anticipated flights.

Mayne Pharma Group (MYX.ASX)

Summary:

Overall MYX missed expectations, with underlying EBITDA ahead of expectations (attributed to FX benefits), but unadjusted net income and EPS figures were significantly below expectations due to intangible asset impairment associated largely with the generic business.

Source: Refinitiv Eikon

Key metrics:
    • Specialty Brands Division (SBD) revenue was US$52.9m, down 19% on FY19, largely impacted by COVID-19
    • TOLSURA experienced solid growth across FY20 until the 4QFY20 / COVID-19 pandemic
    • Generic Products Division (GPD) reported revenue was US$169.8m, down 26% on pcp impacted by competition on key products – liothyronine, dofetilide and butalbital
    • Mayne Pharma International (MPI) performance was significantly stronger in the 2HFY20 with sales up 20% on 1HFY20 benefiting from positive impacts of COVID-19.
    • Reported revenue A$42.4m, up 4%
    • Metrics Contract Services (MCS) revenue was US$55.6m, up 8% on pcp benefiting from new development programs and manufacturing revenues
    • Significant reduction in R&D and operating expenses (-29% and -11% respectively)
    • FX benefit of A$6m in EBITDA with average AUD:USD rate of 0.6712 in FY20 v 0.7153 in FY19

Outlook:

The key strategic priority for MYX is to return to growth by repositioning the company into sustainable products, distribution channels and therapeutic areas. They have key pipeline products pending at the FDA which will be key drivers of this transformation and will realise committed costs savings from new supply agreements and efficiencies in the manufacturing network. Contract services are expected to benefit from the pipeline of committed development business and growing manufacturing revenues while Speciality Brands is expected to benefit from its restructured dermatology cost base and a return to more normalised prescription patterns. There will be no increase in executive KMP salaries in FY21.

FY21 key goals:

    • Commercialisation of novel oral contraceptive NEXTSTELLIS.
    • Expand dermatology and women’s health portfolio and advance key pipeline products.
    • Maximise SUBA – itraconazole franchise.
    • Accelerate Contract Services Platform Globally.
    • Optimisation of cost base.

Fortescue Metals Group (FMG.ASX)

Summary:

Overall, FMG beat expectations, with its dividend being the highlight of the report (significantly higher than expectations, with a payout ratio of 77%). Its outlook is neutral, with production numbers not expected to change much from FY20, its C1 costs to increase from US12.94/wmt to US$13-13.5/wmt, and its capital expenditure to increase from $1.97 bn to $3.0-3.4 bn.

Source: Refinitiv Eikon

Key metrics:

Source: Refinitiv Eikon

Outlook:

  • 175-180mt Iron Ore Shipments (similar to FY20)
  • C1 costs based on assumed exchange rate of AUDUSD 0.7: US$13-13.5/wmt (higher than FY20)
  • Capital Expenditure: $3.0-3.4 bn
    • US$1.0bn of sustaining, operational and hub development capital
    • US$140mm of exploration expenditure and studies
    • US$1.9-2.3bn for major projects (Eliwana, Iron Bridge and Energy)

Super Retail Group (SUL.ASX)

Summary:

Overall, SUL’s earnings were ahead of estimates, with dividends significantly higher than expected. Outlook is fairly bullish, especially in the short-term, with FY21 starting strong (first 7 weeks of FY21 saw a 32% growth in LFL sales). We expect SUL to continue its strong performance from changing consumer behaviour trends and the gradual reopening domestically.

Source: Refinitiv Eikon

Key metrics:


Outlook:

SUL expects FY21 capital expenditure to be approximately $90 mil. No other specific guidance was given due to uncertainty in consumer spending patterns, however FY21 is off to a strong start, with the group LFL sales growth in the first seven weeks up by 32%.

Whispir Limited (WSP.ASX)

Summary:

Overall, WSP’s earnings beat market expectations (as well as its own guidance given in June). It provided a positive outlook for FY21, with revenue expected to grow by 20-30%. Given the lack of clarity in the wider market due to COVID-19 uncertainties, this signals strong confidence from WSP’s management.

Source: Refinitiv Eikon

Key metrics:
    • ARR increased by 34% YoY (at $42.2m), largely due to Increased platform usage for operational coordination and customer marketing messages (H1FY2020).
    • Customer Revenue Retention of 124%
    • Gross margin of 63%
    • Record new customer growth, with 630 new customers added in FY20

Outlook:

    • FY21 ARR: $51.1m – $55.3m (21.09% – 31.04% increase).
    • FY21 Revenue: $47.5m – $51.0m (21.5% – 30.44%, usually their revenue increases by 29%, 12%.
    • FY21 EBITDA: ($6.2m) – ($4.8m) [15.1% – 34.25%]
    • FY21 R&D Cash Investment: $9.2m- $9.8m.

Jumbo Interactive (JIN.ASX)

Summary:

Overall, JIN’s earnings and dividend confidently beat market expectations, as well as being ahead of its own guidance (provided in June). No specific guidance provided, but JIN remains confident on its $1bn ticket sales vision by FY22. It also confirmed its extended reseller agreement with Tabcorp to 2030, providing licence security for the next 10 years.

Source: Refinitiv Eikon

Key metrics:

Source: Refinitiv Eikon

Worley Limited (WOR.ASX)

Summary:

Overall, WOR’s results beat market expectations, with revenue and dividend beating estimates and EBITDA missing them. WOR anticipates higher FY21 earnings.

Source: Refinitiv Eikon

Key metrics:


Outlook:

WOR’s near to medium term outlook more difficult to predict than previous years, hence not providing specific guidance for FY21. However, WOR did note that they expect higher earnings for the next year. WOR is currently on track to deliver the $190mm ECR acquisition cost synergy target as well as the $275mm operational savings target

Regis Resources Ltd (RRL.ASX)

Summary:

Overall, RRL missed expectations on both earnings and dividend, although growing significantly from last year. This is largely due to a much higher average realised price of gold as RRL’s production numbers decreased by about 3% since FY19. RRL expects stronger production in FY21 (355,000 – 380,000 ounces).

Source: Refinitiv Eikon

Key metrics:
Duketon South Operations Gold Production259,858 ounces, a decrease of 5.46%
Duketon South Operation AISC$1,218, which was an increase of 19.41%
Duketon North Operations Gold Production92,184 ounces, an increase of 4.09%%
Duketon North Operation AISC$1,324, which was an increase of 25.5%

FY21 guidance:

For FY21, RRL expects the following figures:

    • Gold production: 355,000-380,000 ounces
    • C1 cash cost including royalties: A$1,030-1,090 per ounce
    • AISC: A$1,230-1,300 per ounce
    • Growth capital: A$50-60 million
    • Exploration: A$35 million
    • McPhillamys: A$15 million (this is the minimum spend for FY21)

Afterpay Limited (APT.ASX)

Maqro Adviser Video Commentary

Summary:

Overall, APT’s earnings beat market expectations, with its revenue and EPS ahead of estimates, largely due to a lower provision from higher than anticipated collections of instalment payments during COVID-19. Its US underlying sales in July expected to continue throughout FY21 and its launch into Canada in August should extend the reach in North America. APT is also confident on its expansion into Europe through Pagantis in FY21 (already more than 1 million active customers in first year operations).

Source: Refinitiv Eikon

Key metrics:
Active CustomersAPT had 9.9m active customers, which is an increase of 116% on FY19.
Active MerchantsAPT reported 55.4k active merchants, which represents an increase of 72%.
APT Net Transaction MarginAfterpay's net transaction margin for FY20 was 250.2m, an increase of 110%.
Group Net Transaction MarginThe overall Group's net transaction margin for FY20 was 261.3m, an increase of 101%.

Outlook:

US underlying sales in July expected to continue throughout FY21. APT also expects to launch into Canada in August, extending its reach in North America. The acquisition of European based Pagantis will facilitate expansion of APT into multiple European markets in FY21 (already have more than 1 million active customers in the region in the first full year of operation) – addressable market in excess of $240bn through the acquisition of Pagantis.

Woolworths Group (WOW.ASX)

Summary:

Overall, WOW slightly missed expectations, with its online sales the highlight of its results (+42%). No specific outlook given, but the total sales growth for FY21 so far (8 weeks in) is strong, with group online sales up 85% and group total sales up 12%. However, the outlook remains uncertain as we are unsure of the duration of elevated demand.

Source: Refinitiv Eikon

Outlook:

From FY21 WOW will revert from average inventory days to a more holistic trade working capital days scorecard measure. In FY20 the focus on average inventory days delivered a 2.4 days reduction on FY19 to 37 days. Woolworths Group continues to operate in an environment with high levels of uncertainty and economic challenges. Headwinds driven by the COVID-19 pandemic, cost pressure and the mix of impacts from eCommerce have led WOW to set material productivity targets and establish strong cost management settings for F21. The first 8 weeks of FY21 demonstrated strong online and total sales, but outlook remains cloudy as we are unsure of the duration of virus-related supermarket boost.

Appen Limited (APX.ASX)

Summary:

Overall APX’s half-yearly results disappointed to the downside, missing expectations but maintained FY20 guidance with an emphasis on weakness in 2H20 due to COVID-19 impact. However, its long-term outlook remains strong as its one of the highest quality company in its industry.

Source: Refinitiv Eikon

Key metrics:
    • Relevance $273.9M (up 34%)
    • Speech & Image $31.9M (down 20%)
    • 75% increase in committed revenue
    • 4 of 5 major customers using Appen annotation platform (former Figure Eight platform)
    • 405% increase in annual contracted value (ACV) to US $103M

Outlook:

No material changes to growth investments, however COVID-19 may have a small impact on 2H20 revenue. Guidance maintained based on current information:

    • YTD revenue plus orders in hand for delivery in FY20 of approximately $475m in August 2020
    • Full year EBITDA for the year ending Dec 31st, 2020 is expected to be in the range of $125-130m
    • Full year EBITDA margins at high teen percentages

 

Sandfire Resources (SFR.ASX)

Summary:

Overall, SFR’s results were broadly in-line with expectations, with a downgrade to FY21’s production already known beforehand from its Q4 report released a month ago. The key highlight is the higher than expected dividend (34% higher than expected).

Source: Refinitiv Eikon

Key metrics:
Copper ProductionCopper production was 72,238t in FY20, up 4.1% from FY19
Gold ProductionSFR produced 42,263 ounces of gold in FY20, which was a decline of 4.93% from FY19.
Cost per lbThe C1 cost per pound was 72 cents, a decline of 13.25%

Outlook:

Record DeGrussa Operations FY2020 production and cost performance to be continued into FY21, however production is expected to be 67-70,000t Cu and 36-40,000oz in FY21, slightly lower than current productions. SFR expects to complete and announce the results of the Feasibility Studies on the T3 Copper-Silver development project in Botswana and the now fully permitted Black Butte Copper Project in Montana, USA. SFR also expects to post a maiden resource for the A4 Dome discovery in Botswana with scoping underway to include it along with T3 in an expanded Motheo production hub. Active exploration continues across the Kalahari Copper Belt in Botswana and SFR targeting the next VMS discovery across the emerging Bryah Basin VMS district in Western Australia