Trading Day: ASX higher as travel stocks surge, Zip Co sinks
Australian stocks rose strongly and BHP hit a record after gains on Wall Street. Flight Centre, Qantas shares rose despite losses. Zip Co and A2 Milk dive. ASIC sues NAB.
- ASIC sues NAB over fees
- Zip loss blows out but revenue surges
- Afterpay to raise $1.25bn
- Air NZ sinks to loss
That’s all from the Trading Day blog for Thursday, February 25. Australian stocks rose strongly and BHP hit a record after gains on Wall Street, where the Dow lifted 1.4 per cent to a new record close, the S&P 500 added 1.1 per cent and the Nasdaq rose 1 per cent. In earnings season, results are from Qantas, A2 Milk, Link, Flight Centre, TPG Telecom, Stockland and Zip Co, among others.
Ben Wilmot 8.47pm:Housing developer AVJennings riding pandemic recovery
Housing developer AVJennings is recovering from the COVID-19 pandemic with a surge of sales on the back of government stimulus packages.
While revenue plunged by about one third on the first half of last year, contract signing volume was up 47.7 per cent to 415 sales in the first half.
AVJennings said it expects a stronger second half and it will receive revenue from projects in Melbourne and NZ. Profit after tax fell by 37.7 per cent to $5.5m partly due to the accounting treatment of a Perth project.
The developer said the reduced profit showed how important support for the housing industry via the HomeBuilder and various state stamp duty rebates and other schemes had been.
AVJennings chief executive Peter Jennings said without some trigger the last six months had looked very challenging. He said HomeBuilder had been successful in achieving its aims.
“We have certainly seen activity levels rise to levels well above what we all expected and feared going into that period. But it has still not, in our opinion, led to an overall situation where volumes are at levels that would have existed had the pandemic not occurred,” he said.
“It has been particularly pleasing to see the increase in first home buyer levels as various schemes have incentivised their entry into the property market,” he said.
Mr Summers said some builders had closed their books as they focused on meeting their obligations for contracts on hand. “Yet enquiry levels and sales have escalated in recent months ... we believe a significant portion of the underlying demand remains.”
“Moving forward, activity will increasingly be based on buyers’ growing confidence,” Mr Summers said.
AVJennings called out the impact of stimulus measures such as JobKeeper - where it received $2.7m - as having a positive impact and allowing the company to operate through the pandemic.
AVJennings declared an interim fully franked dividend of 0.7c per share as it acknowledged continuing volatility around COVID-19 while remaining confident about the continuing strengthening economic recovery.
It also called out the level of strong pre-sales on hand for the second half of fiscal 2021.
The second half of fiscal 2021 will see significant revenues flow from its Waterline Place and Ara Hills projects.
Around 118 additional contracts have been signed in 2021, forming a solid base for the second half of fiscal 2021.
AVJennings said even allowing for the cessation of the HomeBuilder scheme it was cautiously optimistic that the recovery will consolidate through 2021, with consumer confidence returning, the low cost finance, slowly rising employment levels and the rollout of COVID-19 vaccines which are now underway in Australasia.
Jared Lynch 7.47pm:Ramsay resumes dividends with return to ‘normalcy'
Australia’s biggest private hospital group, Ramsay Health Care, will resume paying dividends as a sign of confidence the post-coronavirus world is beginning to emerge.
Despite net profit sinking 12.5 per cent to $226m in the six months to December 31, chief executive Craig McNally said Ramsay’s hospitals were functioning at “100 per cent unrestricted capacity” and cashflow was strong enough to reward investors again.
“We had a cautious optimism about what the foreseeable future in Australia looks like,” Mr McNally told The Australian.
“We paid the dividend because we are confident about the cash flow and balance sheet position we are in.
“Surgical backlogs and latent demand for non-surgical services are expected to drive volumes as the general public’s comfort with the hospital environment improves. Ramsay expects to assist with relieving pressure on public wait lists.”
Investors welcomed Mr McNally’s comments, with Ramsay’s share price soaring 7.7 per cent to $68.18 compared with a 0.8 per cent gain across the broader sharemarket.
Eli Greenblat 7.03pm:Lockdown lifts Taco Bell and KFC stores
Restaurant Brands New Zealand, the billion dollar fast food operator that operates Taco Bell and KFC stores across Australasia, Hawaii and California reaped the rewards of people stuck in lockdowns and opting for a tasty treat, with it posting a 2.8 per cent lift in full-year net profit to $30.9m as sales rose 26.5 per cent to $892.4m.
A number of fast food chains have reported upbeat earnings and sales through the pandemic, such as McDonald’s Australia and Collins Foods, the ASX-listed group that also owns a stable of KFCs in Australia, as online delivery also booms.
Restaurant Brands, which is listed both in Australia and on the New Zealand stockmarket, said on Thursday that Covid-19 created considerable disruption across all four operating divisions, and was particularly testing for the New Zealand operations with the entire business being closed for nearly five weeks in March-April 2020.
The Australian, Hawaiian and Californian operations, while adversely affected, had generally continued to trade through the crisis and consequently have sustained much less of an adverse profit impact, the company said.
Following a change of its reporting dates, the latest 2021 results are for 52 weeks (full year) versus 44 weeks for the December 2019 period previously reported.
Cameron England 6.27pm:MotorCycle Holdings’ strong sales rev up profit
MotorCycle Holdings has more than tripled its first half profits on strong sales, but is not of a mind to give back the $5.8m in JobKeeper payments it was paid last year.
The Slacks Creek, Queensland, company will pay $6.1m in dividends, but chief executive David Ahmet said the decision to pay the dividend was made on the basis of the underlying numbers.
Mr Ahmet, who personally owns 18.3 per cent of the company and therefore stands to be paid $1.1m in dividends, said the company was fighting for its survival last year and there were real concerns for a three-to-four month period that it might not survive.
6.20pm:Listen to the latest Money Cafe podcast
On this week’s episode of The Money Café, Alan Kohler and James Kirby delve into the mystery of the unlicensed adviser and her missing $20m. The pair also discuss Bitcoin’s bad week and the phenomenon of magic mushroom investing.
Ben Wilmot 6.07pm:GDI Property to launch $1bn Perth tower
Listed property investor GDI Property Group has revealed plans for a major project in Perth CBD’s west-end with a new 33-floor tower and a redevelopment of key buildings along the city’s St George’s Terrace.
The group has won planning approval for its Mill Green development, which comprises a tower at 1 Mill Street and works at 5 Mill Street and 197 St George’s Terrace.
The project is expected to be completed by the end of 2024, when the state’s resources boom will be in full flight and the developer is in talks with potential tenants.
GDI managing director Steve Gillard said the development presented a rare transformational opportunity for businesses and the city.
“Mill Green will be the ideal new home for major business headquarters, significant government office space or even the creation of a world-class, dedicated professional hub that will further place Perth on the map for global industry,” he said.
It will comprise a 40,000sq m prime office tower and broader precinct works to 5 Mill Street including an enclosed food and dining precinct and associated landscaping.
It will be surrounded by inner-city garden areas, an amphitheatre and entertainment areas, a retail precinct, a gymnasium and childcare facilities.
The two smaller buildings will also be overhauled.
Damon Kitney 6.06pm:Reece ‘resilient’ in tough market conditions
Reece chief executive Peter Wilson says the bathroom and plumbing product giants’ “strategy, business model and people have proven resilient” in tough market conditions as it posted a 17.3 per cent increase in half year net profit to $123m.
The result was underpinned by a steady 7 per cent increase in Australasian sales to $1.47bn, while in North America sales rose 1 per cent to $1.51bn.
Reece, whose shares have more than doubled since May last year, kept its interim dividend steady at 6¢ per share to be paid on April 15.
Bridget Carter 5.20pm:Afterpay ‘to upsize’ raising to $1.5bn
Afterpay is expected to upsize its convertible bond raising to $1.5bn on the back of strong demand, say sources.
The buy now pay later service provider announced on Thursday that it was raising at least $1.25 billion by way of unsecured, zero coupon convertible notes due in 2026.
Working on the raise is Citi, Goldman Sachs and JPMorgan, while Highbury Partnership is also advising.
Proceeds are being used to increase its interest in the US-based Afterpay business to about 93 per cent from around 80 per cent.
4.36pm:ASX ends +0.8%; BHP hits record
Australia’s sharemarket rose strongly as a 0.3pc rise in S&P 500 futures added to positive overnight leads from equities and commodities markets offshore following reassuring comments from Fed chair Jay Powell.
The S&P/ASX 200 index closed up 0.8pc at 6834 after rising as much as 1.2pc to a four-day high of 6857.3, putting the focus back on the record high of 6917.3 points hit last week.
The Materials, Energy and Health Care sectors outperformed, while the Industrials, Staples, Tech, Discretionary, Real Estate, Utilities and Financial sectors underperformed and Communications moved in line with the index.
BHP rose 3.3pc to a record high close of $50.45 after hitting $50.78 intraday, Woodside rose 2.7pc after WTI crude rose 2.9pc to 12-month high of $US63.45 and Ramsay Health Care surged rose 7.4pc after its results and Nanosonics surged 9.5pc on broker upgrades.
IDP Education rose a further 6.6pc, Flight Centre jumped 8.8pc after its results showed good cost control, Webjet rose 4.4pc and Qantas rose 1.8pc after its results, but faded from a two-month high intraday.
Australia’s 10-year bond yields surged 13bps to an 11-month high of 1.744pc, despite hefty RBA bond buying, as capex data smashed market estimates.
Rising bond yields continued to underpin the Financials sector, with 3 of the 4 major banks up more than 1pc.
Zip Co dived almost 8pc after its results while Afterpay was halted for a capital raising via a $1.25bn issue of convertible notes to lift its underlying interest in Afterpay US to about 93pc from 80pc.
Eli Greenblat 4.35pm:DJs owner cautious on economic outlook
Woolworths Holdings, the South African owner of upmarket department store David Jones and Country Road Group, has warned that early expectations of a recovery in the Australian market were dashed by Victoria’s recent five-day lockdown while it is cautious of the impact to the local economy when government spending initiatives such as JobKeeper come to an end.
The South African retailer issued its first-half financial results on Thursday, which showed its flagship Australian retail business David Jones was still showing the bruises of COVID-19, lockdowns and the lurch into a recession.
David Jones sales over the 26-week period to December 27 declined by 8.8 per cent and by 10.5 per cent in comparable stores. Excluding Victorian stores, which traded significantly down on the prior period due to the extended lockdown, the balance of the David Jones business, including online, grew by 5.9 per cent.
Online sales increased by 55.5 per cent for the half, contributing 17.7 per cent to total sales over the half. Gross profit margin was 0.3 per cent lower than the prior period, at 34.8 per cent, due to higher online fulfilment costs and a higher mix of lower-margin sales, which offset reduced markdowns and promotions.
Woolworths Holdings, which bought David Jones for $2.2 billion in 2014, said expenses were 14.9 per cent lower than the prior period, benefiting from government support and rent relief and the cost-out initiatives implemented to mitigate the impact of the loss of trade.
The space reduction, including the exit from Market Street in Sydney, contributed further to the cost reduction.
3.28pm:RBA regaining control of 3-yr bond
It looks like the RBA is starting to regain control of the 3-year bond yield after an epic battle with the market today.
The 3-year bond yield has fallen 0.6bp to 1.21pc - on track for its lowest daily close in six days - after a massive intraday reversal of weakness.
At 11.15am the RBA announced a record amount of bond purchases to defend its 0.1 per cent target.
That followed the RBA’s purchase of $1bn of bond buying on Monday, its first defense of the target in almost 3 months.
Traders were primed for further action after Monday’s buying failed to stop the 3-year yield rising 0.5bp to 0.122pc, let alone get it back to the target.
But they were initially underwhelmed by the RBA’s announcement that it would buy $3bn of April 2023 and April 2024 bonds on Thursday.
The 3-year benchmark initially rose as much as 2.7 bps to 0.141 per cent, matching a 2.5-year high reached on Monday, before turning down sharply from there.
3.18pm:Qantas to emerge in strong position: Moody’s
“We expect Qantas to emerge from the pandemic in a strong position and with an increased domestic market share, given its excellent business profile,” says Ian Chitterer, Vice President, Moody’s Investors Service.
“The airline’s first-half results were unsurprisingly weak given ongoing international border closures and unpredictable, intermittent domestic border shutdowns.
“Qantas’ liquidity will be key to its ability in managing through this period of uncertainty while positioning the business for a recovery.
“We have factored the high level of net debt/EBITDA for fiscal 2021 into the rating and negative outlook. This elevated leverage is acceptable during the pandemic given Qantas’ strong liquidity, business profile, and track record of conservative financial policy, under which we assume that debt reduction will remain a key focus until balance sheet strength is restored. Prior to the pandemic, Qantas had prioritized balance-sheet strength and liquidity for a number of years, despite very strong earnings, and the coronavirus outbreak has shown the benefit of this prudence.
“We therefore assume that both management and shareholders will prioritize the strengthening of Qantas’ credit profile to its pre-covid level to ensure it is well positioned for any future shocks.”
Lachlan Moffet Gray 3.06pm:Propel Funerals sees future death numbers rising
Propel Funerals boosted its profit and interim dividend despite death volumes in its key markets dropping below long-term averages as increased hygiene measures lowered flu cases - and the disease’s associated deaths.
Revenue of $59m was 3 per cent higher than the prior comparable period while net profit after tax lifted 7.6 per cent to $8.4m.
A fully franked interim dividend of 6c a share was declared, up from 4c last year.
The company performed 6897 funerals in the half year period, up 3.8 per cent, though deaths trended lower in key markets and the total funerals figure was bolstered by acquisitions.
“For example, in the first five months of FY21, total registered deaths in the state of Queensland declined 10.5% compared to the PCP,” the company said.
The company noted that flu cases in Australia “were circa 99 per cent below the 5 year average”
The company said this “is expected to result in a deferral of death volumes into future periods” and provided a positive earnings outlook on that assumption.
“Historical experience suggests the below trend death volumes in 2020 should be temporary, given prior period declines have rebounded quickly; the unusually benign flu season in 2020; and the growing and ageing population in Australia and New Zealand,” the company said.
“Recent trading indicates that death volumes may be starting to revert to long term trends, with Propel recording positive comparable funeral volume growth in the three months to mid February 2021.”
Lachlan Moffet Gray 1.54pm:Universal Store posts record profit
ASX newcomer Universal Store has unveiled record profits and pledged to repay some Jobkeeper as both retail and online clothing sales boomed in the second half of the financial year.
Sales for the period lifted 23.3 per cent to $118m while net profit after tax jumped 47.4 per cent to $15.8m.
Retail stores like for like sales grew by 19.1 per cent while online sales grew by 128.3 per cent.
“This is the result of a significant investment in our online capabilities, including the recent implementation of ship-from-store and click & collect,” the company said in a statement to the ASX.
An interim dividend of 5c a share was declared.
The company received $4.4m in JobKeeper benefits and said it would repay $3m, which was the benefit of the subsidy net of tax.
“The company appreciates the important role of the JobKeeper scheme in enabling the Company to support its team through significant periods of store closures in 2020,” the company said.
“This policy gave us the necessary confidence to plan and stand our teams back up promptly as circumstances permitted.
“We have continued to support our teams as further store closure periods have occurred notwithstanding the fact that we ceased participating in the JobKeeper program in September.”
Bridget Carter 1.52pm:What's on the chopping block in AMP sale?
Speculation is mounting that AMP is selling only the infrastructure funds management component of its AMP Capital business to Ares Management.
It leaves the Australian listed financial group with the real estate platform within AMP Capital.
Sources say that AMP Capital’s infrastructure team has been eager for the business to be under the control of Ares, which counts former Australian and New Zealand Credit Suisse boss John Knox as its regional chairman.
However, the understanding is that the real estate platform within AMP Capital will be retained, based on concern over whether some of its key investors would see the US-based group as the best party to take the reins.
Already, some superannuation funds, including Sunsuper, have offered their real estate investment mandates elsewhere.
UniSuper is also expected to find another manager for its real estate investments that are currently overseen by AMP.
It comes at a time of talk that a sale by AMP of AMP Capital to Ares is close, but that only part of the business will be offloaded.
One possibility is that AMP retains about 20 per cent of AMP Capital’s infrastructure operations, say sources.
A controlling stake would to enable the global asset manager Ares to add infrastructure to its global platform.
Following the departure of key staff out of AMP Capital, including real estate boss Carmel Hourigan, the understanding is that other key executives have been offered financial incentives to stay at the business, which would be paid out around April.
AMP Capital manages $25.9bn worth of infrastructure and real estate worth $28.2bn.
The move by Ares comes after it bid last year for the entire AMP business, putting forward a $6.4bn indicative offer.
However, after undertaking due diligence, it abandoned the takeover plans for the entire company.
Dexus Property Group has separately put forward a proposal to merge its Dexus Wholesale Property Fund with the AMP Capital Diversified Property Fund (ADPF) and an agreed deal on this is expected to be announced as early as next week.
The ADPF includes investments in buildings such as Sydney’s Quay Quarter office and retail complex at Circular Quay and the shopping malls Macquarie Centre in Sydney’s north and Pacific Fair on the Gold Coast and its properties are understood to be worth at least $4.5bn.
The Dexus proposal is understood to have been earlier encouraged and welcomed by many of the existing investors within the AMP Diversified Property Fund, many of which are the same that invest in the Dexus-controlled DWPF.
Lachlan Moffet Gray 1.36pm:Ovato takes loss, plus $18m in JobKeeper payments
Magazine printer and packer Ovato received $18.3m in JobKeeper payments in the last six months, following a business restructure that saw $19m in redundancy payouts of 205 workers covered by the federal government’s fair entitlements guarantee.
It comes as the company - backed by the reclusive Hannan family - reported a half year loss of $9.7m on earnings before interest, tax depreciation and amortization of $22.3m.
The company said it anticipated full year EBITDA to be in the lower end of guidance at $31m-$35m as printing volumes remain subdued due to COVID-19.
It also said the restructure would put the company in a better position going forward.
“The restructure has reset our balance sheet and allowed us to reduce our manufacturing footprint and fixed cost base to better match future demand,” it said.
“Our new Ovato Print Australia Enterprise Agreement allows us to be more flexible in managing our workforce and to affordably adapt to future changing demand.”
1.20pm:Risk markets can breathe easy: Rieder
BlackRock’s Rick Rieder says investors in risk assets - like equities and commodities - can relax after Fed chair Jay Powell’s guidance that the Fed will kep supporting the economy and “help ensure that the recovery from this difficult period will be as robust as possible.”
“There were very clear references to the importance of fiscal support and vaccine implementation to economic potential, but it was just as clear that now is not yet the time for the Fed to begin communicating any change in its extremely easy and supportive monetary policy,’ Mr Rieder says of the Fed Chairman’s two-day semi-annual testimony to Congress. “In fact, one of the key sentences was that the Fed will ‘communicate well in advance’ of any change in the existing asset purchase or interest rate policy.
By implication, we are still too far in advance of their letting us know in advance. Hence, any of the market’s (we think unjustified) fears of a taper tantrum are not within eyesight, as yesterday’s communication was clear that it is not time to communicate any change.”
He says markets will continue to anticipate a change in communication from the Fed, as the economy progresses further this year and next.
In his view this will likely drive interest rates moderately higher from today’s levels, particularly at the longer-end of the yield curve, but also in the belly of the curve, as rate forwards are still “extremely flat”.
“Owners of risk assets, however, should breathe a sigh of relief that the Fed will not disrupt an environment benefiting from very low discount rates on their investments, and consequently some of the recent market volatility is likely to moderate over the coming weeks,” Mr Rieder says.
Lachlan Moffet Gray1.17pm:Nufarm says conditions still positive
Nufarm says revenue grew 17 per cent for the first four months of the financial year to $845m, with positive growth in all crop protection regions and seed technologies.
The trading update, released to the ASX to provide “additional transparency” ahead of half year results being reported in May, contained comments from CEO Greg Hunt, who said conditions were improving in Australia and New Zealand.
“The positive momentum we saw in the second half of last financial year has continued with revenue growth in all regions and our Seed Technologies business,” he said.
“While our major trading months are still ahead of us and uncertainties including currency translation and supply chain impacts of COVID-19 remain, improved seasonal and market conditions in Australia and Europe are driving a recovery in sales and these regions are expected to make a meaningful contribution to earnings growth in FY21.”
Perry Williams12.45pm:Qube quits race for Toll Holdings Global Express
Logistics operator Qube Holdings has dropped out of the race for Japan Post’s $3.5bn Toll Holdings Global Express unit.
Japan Post moved to a second round for the sale with buyers including Allegro Funds Management thought to still be in the hunt.
Qube said it was notified on Monday it had not made the cut.
“We’ve participated in that process and were effectively told on Monday this week that we won’t be proceeding to the next stage,” Qube managing director Maurice James told analysts after its interim results on Thursday.
Qube is watching whether other Toll divisions are subsequently put up for sale with Japan Post retaining ownership of Toll’s logistics and forwarding divisions.
Japan Post bought Toll for $6.5bn in 2015 but the deal has proved disastrous with giant writedowns and losses.
Lachlan Moffet Gray 12.23pm:Bega wins right to trademark
The Supreme Court of Victoria has upheld Bega Cheese’s entitlement to the Bega trademark following a challenge by Fonterra Brands Australia which began in 2017.
In a statement to the ASX, Bega said the Supreme Court ruled it can use the Bega name on products “outside of the scope of the Fonterra licence without Fonterra’s consent.”
“In practical terms, this means that while Fonterra has an ongoing licence to use the Bega trade mark on natural and processed cheddar cheese, string cheese and butter (Licensed Products), Bega Cheese is entitled to use the Bega trade mark on products outside of the scope of the Licensed Products including on peanut butter,” the company said.
“Since its acquisition of the Mondelez grocery business in 2017, Bega Cheese has sold Bega branded peanut butter products.
“Bega Cheese is pleased that its right to use its brand on these products has been confirmed by the court.”
Counter claims from Bega alleging breaches of a licence by Fonterra were dismissed.
12.2pm:ASX hits four-day high
Australia’s share market remained strong at midday after hitting a 4-day high following offshore gains.
The S&P/ASX 200 was up 1pc at 6840 after rising as high as 6847 as a 0.2pc gain in S&P 500 futures added to positive leads from global equities and commodities markets.
The Energy, Materials, Health Care and Real Estate sectors were outperforming while Tech was keeping pace with the market, despite an 8pc fall in Zip Co with BNPL peer, Afterpay, halted for a capital raising.
Among large cap standouts, Woodside rose 3.4pc after WTI crude rose 2.9pc, BHP rose 3pc, CBA and NAB rose 1pc, Ramsay Health Care rose 6.5pc after its results and Lendlease jumped 3.8pc.
Nanosonics leapt 81.pc on broker upgrades, IDP Education continued to surge, up 8pc, Flight Centre rose 7pc after its results showed good cost control, Qantas soared 4pc after its results and Webjet gained 3.6pc.
Australia’s 10-year bond yields surged 13bps to an 11-month high of 1.744pc, despite hefty RBA bond buying, after capex data smashed market estimates and US 10-year Treasuries added 3bps to 1.40pc.
Joyce Moullakis 11.50am:SocietyOne weighs IPO
Personal lender SocietyOne has tapped stockbrokers Morgans and Evans and Partners as it weighs up a 2021 ASX listing.
The Australian understands the appointments were made ahead of the SocietyOne board making a decision over the next month or two about whether to proceed with an initial public offering. The mooted ASX listing would help facilitate more funding to execute the company’s growth strategy.
SocietyOne has been contacted for comment.
The company on Tuesday announced a partnership with Westpac, which will see digital banking services made available to SocietyOne’s customers in the second half of this year.
The deal further cements a relationship between the bank and SocietyOne, given Westpac’s venture capital partnership Reinventure has been an investor in the personal and peer-to-peer lender since 2014. Besides Reinventure, it is backed by shareholders including Seven West Media, Consolidated Press Holdings, G&C Mutual Bank and News Corp, publisher of The Australian.
11.39am:Capital expenditure beats forecasts
Australia’s private new capital expenditure has smashed estimates for the December quarter.
Capex rose 3pc, which was three times Bloomberg’s consensus estimate of a 1pc rise.
Buildings and structures rose by 0.7pc while equipment, plant and machinery surged 5.7pc.
Mining investment fell 1.4pc in the quarter, while non-mining investment surged 4.9pc versus the September quarter.
This is a good sign for December quarter GDP data next week.
11.27am:RBA buying $3bn 3-yr bonds to defend target
The Reserve Bank has come out swinging against the recent backup in bond yields.
The central bank is buying $3bn of 2- and 3-year bonds to defend its 0.1pc yield target, according to its website.
The RBA is also buying $2bn of Nov 2028 and Nov 2031 bonds as part of its QE program.
It’s the second time this week that the RBA has had to defend its YCC target after its $1bn purchase of 3-year bonds had little impact amid rising bond yields globally.
The Australian dollar hasn’t reacted much, with 3-year bond yields unchanged at 0.127pc after initially rising 1bp and 10s up 5.6bps at 1.673pc after hitting an 11-month high of 1.69pc.
Lachlan Moffet Gray 11.22am: ASIC sues NAB over fees
The corporate regulator is suing NAB in the Federal Court for allegedly charging fees it was not entitled to between 2015 and 2019.
The Australian Securities and Investments Commission on Thursday alleged that between February 25, 2015 and February 22, 2019 NAB charged fees on periodic customer payments on at least 195,305 occasions in violation of its contract with customers.
These fees included $1.80 for periodic payments to other NAB accounts and $5.30 for periodic payments to other bank accounts.
ASIC says this netted the bank $364,454 from 4874 personal banking customers and 913 business banking customers.
However, NAB’s terms said customers would be exempted from these fees for certain transactions such as NAB home loan payments - but NAB staff on occasion failed to set up this exemption when manually setting up the periodic payment.
ASIC alleges that this amounted to making false and misleading statements, engaging in misleading and deceptive conduct and a violation of its obligation as a financial services licensee.
The regulator said NAB identified this issue by the end of October 2016 but did not lodge a breach report or begin remediating customers until July 2018.
Furthermore, it is alleged NAB continued to overcharge customers “even though it knew overcharging was occurring” because it did not have systems to prevent the fees from being charged incorrectly.
The system was eventually changed on February 22, 2019. ASIC said this amounted to a further breach of its obligations as a financial services licence as well as a failure to provide services efficiently, honestly and fairly.
A date has yet to be settled for a case management hearing.
11.19am:RBA to stop extending YCC in July: GS
The Reserve Bank will stop “rolling-forward” its yield-curve control program around mid- year, making the April 2024 bond the end point for its 0.10 per cent target, according to Goldman Sachs.
“We expect the RBA to pair the YCC announcement with a further extension of its QE program into 2022 – ensuring the YCC decision is not viewed as a material hawkish pivot and capping potential upside pressure on the Australian dollar,” says Goldman Sachs Australia chief economist, Andrew Boak.
He sees a “strong rationale” for the RBA to cease rolling-forward the three-year YCC target around mid-year, thereby starting the ‘exit’ of YCC - principally to “resolve the growing tension between the current commitment to keep three year yields at 0.1 per cent while simultaneously guiding that the cash rate may rise in 2024”.
With the RBA’s new conventional QE program as an “insurance policy”, unwinding YCC’s ‘extreme version’ of forward guidance will also “provide the RBA greater flexibility to respond to potential upside surprises to the outlook over the medium term.”
But navigating the exit of YCC is “complicated and risky from the perspective of central bank communication and credibility.”
Delaying the decision to July will “provide valuable time to assess Australia’s vaccine roll-out and how the economy is adjusting to the withdrawal of fiscal stimulus”, he adds.
Mr Boak finds the RBA’s YCC to have been “operationally successful in pinning rates to target, a useful tool to temporarily “insure” RBA’s dovish forward guidance during the crisis, and helpful in partially insulating Australia from tightening global financial conditions.”
But he cautions that there are “clear limits” to what YCC can achieve.
“We do not find evidence that YCC lowers the term structure of rates beyond the targeted tenor, can prevent a sharp steepening/’kink’ in the yield curve, or weighs sufficiently on the AUD when other central banks are aggressively expanding their balance sheets
“In this latter respect, YCC is no substitute for a standard QE program.”
Jess Malcolm 11.14am:Qantas delays return to international travel
Qantas has announced a four-month delay to its planned reopening of international flights as it reported a $1.47bn loss.
It now plans to resume international flights on October 31 2021, instead of in July 2021 as originally planned.
It is unlikely its international network will be fully restored until 2024 at the earliest.
Qantas CEO Alan Joyce said “full vaccination” will now be the requirement to reopen borders instead of herd immunity driven by the emergence of new, more infectious strains emerging overseas.
“As a result, we’re now planning for international travel to restart at the end of October this year, in line with the date for Australia’s vaccine rollout to be effectively complete.”
“We’re still targeting July for a material increase in New Zealand flights. We’re in close consultation with the government, and if things change, so will our dates.”
Qantas also confirmed all its Airbus A380 fleet would remain grounded until June 30, 2023 at the earliest.
Lilly Vitorovich 11.12am:Southern Cross to resume payouts
Southern Cross Media plans to resume paying dividends to investors following a sharp jump in profit, helped by big cost cuts across its Triple M and Hit radio and television stations during the coronavirus crisis and federal government funds totalling around $35m.
The company, which has also slashed its debt by half, expects to pay a final dividend for the 2021 financial year in October. But cautioned it’s subject to “no material adverse change in advertising markets”.
Chief financial officer Nick McKechnie said the company will determine the “quantum of that dividend” at the end of the 2021 financial year and also the future payout ratio.
“I think the board has got enough confidence that the business is recovering well and certainly with the balance sheet we have we‘re in a position to recommence. But we’ll finalise those decisions around quantum and pay out policies when we get to the end of the financial year,” he said on an earnings call.
Chief executive Grant Buckley said the group‘s historic range and payout ratio has been between 65 and 85 per cent of earnings, resulting in a fully franked dividend.
Southern Cross on Thursday reported a 59 per cent jump in first-half profit after tax of $32.5m following a near 24 per cent drop in expenses. It also benefitted from $31.9m in JobKeeper payments from the government, plus $3.4m from the $50m Public Interest News Gathering program.
David Ross11.02am:Parcels boom powers Australia Post revenue
Australia Post has delivered a cracking first half, with revenue growth of 15.5 per cent year on year to $4.3bn, powered by a busy parcel business.
The strong and continued growth sealed the half with a profit before tax came of $166.6m
Parcels and packages accounted for $3.4bn of revenue, up 25.9 per cent for the year.
The $701m jump was due to the unprecedented boom in online shopping wrought by COVID-19 restrictions.
Letter volumes dragged down Australia Post’s balance sheet with volumes once again declining, leaving revenue at $900m.
Letter revenue was down 11 per cent, despite the 10 cent per letter postal rate increase in January 2020.
The letter business was so bad it put a $74.2m loss in the national postal service’s bottom line.
11.00am:ASX extends rise, US futures up
Australia’s share market extended its rise to a four-day high as US futures turned up.
The S&P/ASX 200 rose 1pc to 6846 points as S&P 500 futures rose 0.2pc
The Energy, Materials, Health Care and Financials sectors continue to lead.
10.30am:ASX surges, Ramsay Health up 8.6pc
Australia’s share rose strongly in early trading after solid gains in US equities and commodities
The S&P/ASX 200 rose 0.8pc to 6829.6, recovering all of the previous day’s fall.
That followed a 1.1pc rise in the S&P 500 and a 2.9pc rise in WTI crude oil as Fed chair Jay Powell reiterated that the Fed is a long way from reducing policy support.
The Energy, Materials, Financials and Health Care sectors are outperforming with Woodside up 3pc, BHP up 2.4pc, CBA up 1.2pc and Ramsay Health Care up 8.6pc after reporting today.
Smartgroup rose 7.6pc, Flight Centre rose 5.6pc and Qantas gained 3.4pc after their reports, while Nanosonics rose 6.7pc on multiple broker upgrades.
A2 Milk dived 17pc after lowering its earnings forecast , while JB Hi-Fi, Pact Group, Bapcor and Super Retail Group fell after trading ex-dividend.
Perry Williams 10.08am: Govt pitches in for Musk battery
The federal government’s green bank will tip in $160m to build one of the world’s biggest batteries in Victoria, with the Geelong facility to be developed by billionaire Elon Musk’s Tesla and French renewable developer Neoen.
The Clean Energy Finance Corporation’s $160m senior debt facility will finance the design, construction and operation of the 300 megawatt battery which will use Tesla’s megapack batteries. Neoen will cover the rest of the cost, estimated at about $90m.
The battery is designed to help stabilise the Victorian grid and allow more renewable energy into the system with 250MW reserved to increase the capability of the Victoria to NSW interconnector and react to network outages.
Energy Minister Angus Taylor said the battery could see average industrial electricity consumers save $280,000 a year on their bills while bills for the under threat Portland aluminium smelter could fall by $1m a year.
“This project is a world-class example of how utility scale batteries can help electricity networks support a higher penetration of renewable energy,” CEFC chief executive Ian Learmonth said.
Victoria has a renewable energy target of 40 per cent by 2025 and the battery should be online before the 2021-22 summer.
Lachlan Moffet Gray 10.14am:Resimac doubles payout
Resimac has doubled its interim dividend and almost doubled its half year profit after the non-bank lender grew home loan assets under its management.
Net profit after tax of $50.5m was up 86 per cent on the prior comparable period while a dividend of 2.4 cents a share was declared, up 100 per cent.
Home loan assets under management grew 14 per cent, with 2.14bn of home loans settled throughout the period.
CEO Scott McWilliam said only a small amount of customers remain on deferral.
“We remain committed to supporting the small number of customers who still require support throughout this period,” he said.
“At 31 December 2020, approximately 500 of our customers remained in active payment deferrals, a significant reduction compared to 30 June 2020.”
Lachlan Moffet Gray 9.55am:Cromwell flags reduced payout
Cromwell Property Group has maintained its interim dividend as its half year profit slides, flagging reduced distribution for the full year.
Operating profit fell 26 per cent to $99.1m while a dividend of 3.75 cents per share was declared.
The company said it deferred 6.1 per cent of group rent and waved 0.7 per cent through the half.
Acting CEO Michael Wilde said the group had navigated the period successfully.
“Our assets have proven to be resilient, our cost of debt is at an historic low, we have ample liquidity and substantial headroom on banking covenants,” he said.
The company said full year distribution would be 7 cents per share, half a cent lower than previous guidance.
9.49am:Liveris, St Baker kick in for Novonix raising
Electric vehicle battery developer Novonix will raise $146m to increase US-based materials protection.
The raising includes a fully underwritten $115 million placement to institutional and sophisticated investors.
The issue price of $2.90 represents an 11.9 percent discount to the last closing price of $3.29 on Thursday.
Directors including Andrew Liveris and Trevor St Baker will also subscribe for new stock, with the value of Mr Liveris’s placement amounting to $3m and Mr St Bakers’, $12m.
9.44am:ASX set to rebound amid earnings
Australia’s share market is set to recover from Wednesday’s fall.
That follows solid gains in US equities and commodities after Fed chair Jerome Powell reiterated his dovish call and Tesla jumped 6.2pc after Cathie Wood’s ARK Invest bought more shares on Tuesday.
Overnight futures suggest the S&P/ASX 200 will open up about 0.7pc near 6825 points. A break of 6839.2 would set a four-day high.
But while the Energy, Financials, Industrials, Tech and Materials sectors led gains on Wall Street, bond yields and the Australian dollar continued to surge.
Australia’s 10-year bond yield is up about 6bps at 1.67pc after hitting a fresh 11-month high of 1.685pc.
Meanwhile the “risk on” mood in global markets saw the Australian dollar rise as much as 0.8pc to a 3-year high of 0.7973 overnight.
But the Financials sector should react positively to the rise in bond yields.
The materials sector should be particularly strong with BHP ADR’s equivalent close at $50.27 suggesting BHP will open up about 3pc.
Focus is otherwise on earnings reports with another 20 of the top 200 companies reporting today.
December quarter capex data are due at 1130am.
Lachlan Moffet Gray 9.40am: Class actions help lift Slater profit
Listed law firm Slater and Gordon has increased its half year profit due to strong class action and workplace injury case loads, despite the impacts of COVID-19 on the courts.
The company recorded a net profit after tax of $2.8m as EBITDA lifted from $15.3m to $18.8m.
The company said inquiries grew 16 per cent while active files lifted 6 per cent.
Chair James Mackenzie said the firm achieved the results despite not receiving the JobKeeper subsidy.
“Pleasingly, despite the challenges of COVID-19, we have continued to progress matters on behalf of the thousands of Australians who need our help to access justice,” he said.
“We are especially pleased that we were able to achieve the results that we have reported today without JobKeeper support.”
Lachlan Moffet Gray 9.28am: Candle maker returns JobKeeper
ASX newcomer Dusk has announced it will repay $2.8m in Jobkeeper it received over the half as it recorded a net profit of $16.8m.
The candle manufacturer also declared a fully franked dividend of 15 cents per share.
Managing Director and CEO Peter King thanked the government for the support.
“dusk acknowledges the innovation and speed of this program and the part it played in guiding the country through this most difficult period,” he said.
“The JobKeeper program provided dusk the opportunity to stay connected with its team around the country and plan for and implement the resumption of normal business activity at the earliest opportunity.”
9.16am:Zip revenue surges 130pc
Zip Co.’s first-half loss blew out on the cost of the U.S. expansion that helped to more than double revenue for the period.
The buy-now-pay-later provider reported a net loss for the six months through December of $455.9 million, compared with a $30.3 million loss a year earlier.
The result included $306.2 million in adjustments related to Zip taking full ownership of the QuadPay business in which it previously held a stake.
Revenue surged to $160.0 million from $69.6 million.
The company did not declare an interim dividend.
Dow Jones Newswires
Lachlan Moffet Gray 9.12am:Link examines PEXA IPO
Link Group says it is exploring ways to unlock value from PEXA, including the viability of an IPO.
“In light of the future expected growth in PEXA, all three PEXA shareholders (Link Group, Morgan Stanley Infrastructure Partners and Commonwealth Bank of Australia) have also agreed to explore the viability of an IPO of the business,” the company said.
It comes as PEXA, of which Link has an almost 45 per cent stake, reported a 90 per cent increase in half year operating EBITDA to $51.5m.
Link Group itself recorded an increased net profit after tax of $31m for the half, up from $29m last year.
A dividend of 4.5 cents per share was declared, down from 6.5 cents per share.
Ben Wilmot 9.09am:Stockland brings back guidance on residential boom
Residential property developer Stockland is riding the comeback in the housing market and delivered a rise in funds from operations to $386m in a busy first half.
The company‘s profit dipped to $350m but it has come through the crisis well positioned as its land estates attract first homebuyers and it is stocking up by acquiring more land on the outskirts of major cities.
The company generated net operating cash flows of $493m, reflecting strong residential settlements and improved rental collections from its relatively resilient town centre portfolio.
Commercial property rent collections were running at 90 per cent of net billings at the end of January.
Chief executive Mark Steinert is exiting with incoming chief executive Tarun Gupta to join Stockland at the beginning of June.
Stockland has re-established guidance and is targeting a second half FFO per security range of 16.3 cents to 16.9 cents, which will result In a full year FFO per security of between 32.5 cents and 33.1 cents.
This includes an expectation the residential business will deliver more than 6000 residential settlements for the full year at an average margin of about 19 per cent and rent collection trends will continue to pick up.
The distribution for the full year is expected to be within the target payout ratio of 75 per cent to 85 per cent of FFO, albeit at the lower end of the range.
Lachlan Moffet Gray 9.01am:Afterpay raises to lift US holding
Afterpay has announced it will increase its Afterpay US ownership to as high as 93 per cent through the issuance of $1.25bn in convertible notes.
The notes have an option to be upsized to $250m.
The increase in interest will occur through an agreement with Afterpay US part owner Matrix, a private equity firm.
“Afterpay has entered into an agreement with Matrix pursuant to which Matrix will waive 35 per cent of the underlying interest it holds in Afterpay US, Inc. under the Matrix Convertible Notes for approximately $373 million in cash (Matrix Transaction),” the company said.
“The final price will be determined by reference to the reference share price of the convertible notes offering.
“The Matrix Transaction implies an acquisition price that values Afterpay US, Inc. (on a 100pc basis) at 28pc of Afterpay’s total market capitalisation. The acquisition price is accretive to Afterpay shareholders across GMV, revenue and customer multiples.”
It comes as Afterpay announced a half year net loss of $76.5m, with underlying sales hitting $9.8bn against $4.8bn in the prior comparable period.
Active customers grew 80 per cent to 13.1m while EBITDA increased 521 per cent to $47.9m, excluding significant items.
8.51am:What’s impressing analysts?
Appen started at Hold; $18.27 target price: Barclay Pearce Capital
Appen target price cut 16pc to $16.00; Underperform rating kept: Macquarie
Bendigo & Adelaide Bank raised to Positive: Evans & Partners
Carsales.com raised to Hold: Morningstar
Charter Hall Group raised to Hold: Morningstar
Dexus cut to Hold: Morningstar
Eagers started at Underperform: Barclay Pearce Capital
Eagers raised to Overweight: JPM
Eagers raised to Outperform: Macquarie
HT&E raised to Buy: Jefferies
Lendlease cut to Hold: Morningstar
MNF Group retarted at Buy: Ord Minnett
Medibank Private raised to Add: Morgans Financial
Medibank Private raised to Neutral: Macquarie
Mount Gibson cut to Neutral: Macquarie
Nanosonics raised to Add: Morgans Financial
Nanosonics raised to Neutral: JPMorgan
Nanosonics raised to Buy: Canaccord
National Storage REIT raised to Hold: Morningstar
Nine Entertainment started at Buy: Barclay Pearce Capital
Scentre Group cut to Neutral: CS
Seek cut to Underperform; target price cut 16pc to $23.60: Macquarie
SSR Mining started at Overweight; $19.44 target price: JPM
Sydney Airport started at Hold: Barclay Pearce Capital
Vocus cut to Hold: Jefferies
IDP Education target price raised 25pc to $30; Overweight rating kept: MS
Lachlan Moffet Gray 8.48am:TPG lifts profit, trialling 5G
TPG Telecom has boosted its full year profit through a tumultuous economic period, and has committed to rolling out its fixed 5G wireless network in the year ahead.
The company booked a 24 per cent increase in revenue to $4.3bn and a net profit after tax of $741m.
A dividend of 7.5 cents per share was declared.
The company’s said over the year its subscriber base increased six per cent from 2019 to 2.17 million.
The company’s NBN base increased 28 per cent to 1.90 million.
However, the mobile customer base “was impacted by the absence of overseas visitors and migrants to Australia, especially international students”, declining five per cent to 3.26 million.
The company said it estimated COVID-19 to impact earnings to the tune of $90m.
The company said it had commenced testing of its fixed 5G wireless devices.
“Over the coming months, we will be testing the customer journey and experience to ensure we deliver an exceptional product to our customers,” CEO Iñaki Berroeta said.
The company said in the year ahead it would be imapcted by NBN margin erosion.
Bridget Carter 8.47am:Afterpay to raise $1.25bn
Afterpay has entered a trading halt as it raises $1.25 billion by way of a convertible bond.
The proceeds of the bond raising will help to fund a restructuring of its business in the United States.
Working on the raise is Citi, Goldman Sachs and JPMorgan, while Highbury Partnership is also advising.
The bond involves a zero coupon.
It is understood that there is the opportunity to upsize the bond raising between $200m and $300m.
More to come
Perry Williams 8.45am:Qube boss to retire
The boss of Qube Holdings will step down after a decade in the role as the logistics operator pushes ahead with the $1.65bn sale of its Moorebank logistics asset to Logos Property Group.
Maurice James, who became managing director in 2011, will step down on June 30 and retire at the end of 2021 to be replaced by Qube’s chief operating officer Paul Digney.
“Maurice indicated his desire to retire early last year but agreed to stay on to lead Qube through the COVID-19 pandemic and to the conclusion of the Moorebank monetisation process,” Qube chairman Allan Davies said.
“Paul, is in our view, unquestionably the right person for the job of leading Qube.”
Qube is selling its stake in the warehousing and property unit of the Moorebank Logistics Park to Logos with Qube to retain its 100 per cent interest in the intermodal rail terminals.
The deal is worth $1.65bn with total property proceeds of $1.86bn including Minto Properties.
Qube’s interim net profit after tax rose 9.3 per cent to $74.3m despite revenue slipping 1.7 per cent to $953m.
Its bulk shipping business has been largely unaffected by the pandemic and Qube said its container terminal volumes – including its Patricks port handling business - made a strong contribution.
Its dividend fell 13.8 per cent to 2.5c.
Eli Greenblat 8.42am: Universal beats forecasts
The recently listed retailer Universal Store has beat its earnings guidance for the December half after booking earnings before interest and tax of $31.5 million, which is above recent guidance of $30m to $31m.
The retailer, which triggered a $280m float on the ASX in November, also announced on Thursday it had decided to repay the net first-half JobKeeper benefit received of $3m.
The company said after a record six months of trading, it posted EBIT growth of 69.4 per cent. Statutory net profit of $15.8m is up 47.7 per cent.
Sales of $118m for the December half were up 23.3 per cent on the same period last year. Store like for like sales were 19.1 per cent higher which combined with tight cost control, significantly improved store profitability.
Online sales grew 128.3 per cent to now represent 12 per cent of total sales.
It said sales for the first seven weeks of 2021 are up 23.5 per cent compared to the same period last year. Like for like sales growth was 28.2 per cent.
Universal Store declared an interim dividend of 5 cents per share, payable on May 4.
Eli Greenblat 8.40am:Temple & Webster in strong profit lift
Online furniture retailer Temple & Webster said its first half profit has increased fourfold to hit $12.2 million.
The retailer, which released its unaudited accounts for the December half earlier this month, said it was still witnessing the ongoing adoption of online shopping with an acceleration of these trends due to COVID-19.
The retailer was winning from an increase in discretionary income due to travel restrictions and the recovery of the housing market and unemployment levels.
First-half revenue of $161.6m, was up 118 per cent while pre-tax earnings rose to $14.8m from $2.3m.
Net profit for the half of $12.2m was up strongly from $2.3m last year - a gain of 556 per cent.
Lachlan Moffet Gray 8.37am:Afterpay halt pending raising
Afterpay has entered a trading halt pending the announcement of a capital raising.
The BNPL platform is due to release its half year results later today.
Lachlan Moffet Gray 8.35am:Qube lifts profit, repays JobKeeper
Shipping and logistics company Qube Holdings has unveiled an increased half year profit, declared an interim dividend and pledged to repay the JobKeeper it received this financial year.
Although revenue slipped 1.7 per cent to $953.3m, net profit after tax lifted 8.5 per cent to $82.8m.
A dividend of 2.5 cents per share was declared.
The company said it would repay the $16.8m in JobKeeper it received during the period “based on the pleasing first year half.”
The company said it benefited from a strong rebound in commercial trade in Australia as well as higher volumes of mining commodities and anticipated business would continue to improve over the rest of the financial year.
Robyn Ironside8.32am:Qantas sinks to $1.47bn loss
Qantas has posted a $1.47bn half year loss down from a $648m profit in the previous corresponding period, in what CEO Alan Joyce has called a “stark but not surprising result”.
Mr Joyce noted the heavy loss included nationwide border closures triggered by Victoria’s second wave, which reduced domestic travel by 70 per cent.
Despite the challenges, he said the result showed the group’s underlying strength with Qantas Loyalty and the freight business performing well.
Lachlan Moffet Gray 8.29am:Flight Centre swings to loss
Flight Centre has swung to a half year loss of $233.2m as the continuing shutdown of virtually all international travel hit revenues, but the company says it has lowered its cost base and is ready to recover.
The company said its cost base had been lowered by 66 per cent - an annualised saving of $1.9bn - while maintaining liquidity of $1.2bn.
But CEO Graham Turner said the company was also investing in its post-COVID future.
“In this regard, we have maintained capital expenditure on key leisure and corporate technology projects at pre-COVID levels and have now started to deploy a number of important new products for our customers and our people,” he said.
Domestic travel softened the blow of international restrictions, with revenue in December reaching a COVID-19 period high of $33.5m, while the Ignite business returned to profitability as holiday goers booked cruises for next year.
The corporate travel sector was trading at 16 per cent on the prior comparable period’s level.
Mr Turner said the company was looking to return to a breakeven point for the leisure and corporate travel businesses by the end of the 2021 calendar year.
8.27am:Ramsay Health Care restarts dividends, profit falls
Ramsay Health Care resumed dividend payments even as its half-year net profit fell by 13 per cent, reflecting divergent pressures on its global network of private hospitals created by the coronavirus pandemic
Infection rates remain high in countries such as the U.K. and France, forcing private hospitals there to suspend elective surgery and free up beds for those sickened with the virus. In contrast, Ramsay’s operations in Australia have largely returned to normal as the number of people requiring ongoing treatment for Covid-19 is low.
Ramsay reported a net profit of $226 million for the six months through December, down from $258.4 million a year earlier.
Directors of the company declared an interim dividend of 48.5 cents a share, representing a payout ratio of 50pc of statutory profit.
Dow Jones Newswires
Lachlan Moffet Gray 8.18am:Liberty unveils profit, lifts guidance
Non-bank lender Liberty Financial has managed to grow its first half year profit as an ASX listed company and updated guidance as the end of the COVID-19 economy sparked record levels of lending in November and December.
The company said statutory net profit after tax lifted 12 per cent to $83m - but when excluding IPO costs and non-cash amortisation, profit lifted 58 per cent to $117.7m on an underlying basis.
CEO James Boyle said that the number of customers on COVID-19 loan relief plans had shrunk considerably over the six months to December.
“Liberty’s customers have shown tremendous resilience during the pandemic,” Mr Boyle added,” he said.
“LFG reported a reduction in customers impacted by COVID to 2 per cent of the portfolio as at 31 December 2020 compared to 10 per cent as at 30 June 2020.”
The company said as a result it was upgrading full year net profit after tax guidance from $165.6m to “in excess of $200m.”
8.10am:No broad equity market bubble; JPM
JPMorgan strategists don’t see a broad equity market bubble but rather certain pockets of the market that are experiencing “hyper growth” such as electric vehicles and renewables.
While there is a lot of talk about bubbles, it is hard to see one in the broad equity market, where a dominant group - namely the FANG stocks -practically hasn’t moved for 6 months despite massive amount of stimulus and an expected economic recovery, Financials that have barely recovered 2020 losses, and Energy that is still down 25 per cent from last year despite a commodity bull market,” JPM strategists told clients overnight.
They do see some “relatively contained market segments” that “appear to be in a bubble related” to electric vehicles, renewable energy and innovations stocks, but note that these sectors only make up a small part of the market, with EVs only 2 per cent of the S&P 500. Moreover, they also see “segments that remain cheap”, like energy where positioning remains “heavily underweight”.
“We believe that this is only the first inning of the market rally, and that the rotation into cyclicals could play out for the next year,” they said.
8.06am:Dow closes at record
The Dow Jones Industrial Average hit a new record after Federal Reserve Chairman Jerome Powell reiterated his intention to maintain ultralow interest rates and continue the bank’s asset-purchase policies.
The blue-chip index rose 424.78 points, or 1.4 per cent, to 31962, a closing record. The blue-chip index crossed 32000 for the first time intraday earlier in the session. The S&P 500 gained 1.1 per cent and the tech-heavy Nasdaq Composite added 1 per cent. The Russell 2000 small-cap index, meanwhile, was up 2.4 per cent.
Two days of Mr. Powell’s reassurances have soothed the market’s nerves. The S&P 500 snapped a five-session losing streak Tuesday, while the Nasdaq had fallen in five of the past six trading sessions.
Speaking to the Senate Banking Committee, Mr. Powell reaffirmed his commitment to keeping easy-monetary policies unchanged for the foreseeable future and was generally dismissive of any inflation concerns. That eased investor concerns about rising interest rates and fears that an overheating economy would alter the Fed’s thinking.
“There was relief in the market that yields and inflation aren’t going to be as runaway as anticipated,” said Shawn Snyder, head of investment strategy at Citi U.S. Wealth Management.
Stock markets have wavered in recent days following a strong start to the year, with highflying tech companies leading declines. The Nasdaq had doubled from its lows last March, with companies like Tesla rising even further.
It isn’t at all surprising that investors chose now to lock in some of those profits, said LPL Financial strategist Jeff Buchbinder. “We’ve seen this in other bull markets coming off major bear-market lows. It makes total sense to take a breather.”
Investors said a rise in government bond yields, driven by improving growth prospects and rising inflation expectations, has accelerated a rotation out of the tech stocks that led markets higher during the pandemic, and into the stocks best placed to benefit from an end to lockdowns.
Bitcoin rose 6.9 per cent to $US49,103 after falling 13 per cent Tuesday. Other cryptocurrencies that declined Tuesday, such as ether, also gained.
Tesla rose 4.3 per cent. The company’s share price has fluctuated along with bitcoin in recent days after the electric-vehicle maker said it had bought $US1.5 billion of the cryptocurrency.
Dow Jones Newswires
Eli Greenblat 8.02am:Restaurant Brands lifts profit amid Covid disruption
Restaurant Brands New Zealand, the $1 billion fast food operator that operates Taco Bell in Hawaii and KFC in Australia and New Zealand, has posted a 2.8 per cent lift in full-year net profit to $30.9 million as sales rose 26.5 per cent to $892.4m.
Following a change of its reporting dates, the latest 2021 results are for 52 weeks (full year) versus 44 weeks for the December 2019 period previously reported.
The fast food chain said COVID-19 created considerable disruption across all four operating divisions and was particularly testing for the New Zealand operations, with the entire business being closed for nearly five weeks in March-April 2020.
The Australian, Hawaiian and Californian operations, whilst adversely affected, have generally continued to trade through the crisis and consequently have sustained much less of an adverse profit impact, the company said.
Like-for-like store sales were up approximately 7 per cent for the year, primarily because of the inclusion of $51.9 million of sales for the four months following the acquisition of 69 stores in California (58 KFC and 11 joint KFC/Taco Bell outlets).
In New Zealand sales were up 11.7 per cent to $410.4m and earnings up 11.8 per cent to $75.9m, in Australia sales were up 26.3 per cent to $202.4m and earnings up 18.4 per cent to $27.7m, its Hawaiian operations saw sales rise 25.8 per cent to $US139.3m and earnings up 43.4 per cent to $US21.5m, and in California sales were $US35.6m and earnings at $US5.8m.
No dividend was declared.
7.55am:Iluka profit lifted by demerger gain
Iluka Resources returned to an annual net profit, boosted by a large gain on the spinoff of its iron-ore royalty business in November into a new Australia-listed company called Deterra Royalties.
Iluka reported a net profit of $2.41 billion for the 12 months through December, rebounding from a $299.7 million loss in 2019. The result was lifted by a $2.2 billion gain on the Deterra spinoff.
Underlying profit, which strips out one-time gains, was down 46 per cent at $151.2 million. Iluka declared a final dividend of 2 cents a share.
“Iluka continues to observe signs of recovery in market conditions for zircon and high grade titanium dioxide feedstocks,” the company said on Thursday. “The company has advised zircon customers of a $US70 per tonne price increase effective April 1.”
Dow Jones Newswires
7.35am:Air NZ sinks to loss as pandemic hits travel
Air New Zealand sank to a half-year loss and said it expects significant red ink for its full financial year as the pandemic strangles international air travel.
The carrier’s first-half net loss of $NZ72 million was despite air travel within New Zealand recovering in the wake of lockdowns last year to three quarters of pre-pandemic levels.
The losses ballooned to $NZ185 million when one-time items such as foreign exchange gains were excluded.
Air New Zealand said it has short-term funds of $NZ700 million. The liquidity comprises $NZ550 million of undrawn funds from a credit facility extended by its majority shareholder, the New Zealand government, and $NZ170 million of cash.
Work on a recapitalization that will involve the participation of the government is underway, the airline said, targeting an equity raising to be completed by June 30. Analysts have said Air New Zealand could raise about $NZ1.5 billion.
The company forecast monthly cash losses to range between $NZ45 million and $NZ55 million for the remainder of its financial year, down from an average of $NZ79 million a month from September to January.
Dow Jones Newswires
7.15am:ASX set to open firmly higher after Wall Street gains
Australian stocks are poised for a stronger start as Wall Street turned higher after Fed chair Jerome Powell reaffirmed his commitment to keeping easy-money policies unchanged.
At about 7am (AEDT) the SPI futures index was up 51 points, or 0.8 per cent.
Yesterday, Australian stocks closed down 0.9 per cent.
The Australian dollar was higher at US79.39c.
Iron ore was down by 0.1 per cent to $US172.50 a tonne.
Brent oil jumped 2.6 per cent to $US67.04 a barrel.
Jared Lynch 6.55am:Collapse of daigou trade hurts A2 Milk
A2 Milk has managed to grow its share of China’s infant formula market despite escalating trade tensions between Beijing and Canberra and COVID-19 triggering a collapse of the lucrative Chinese daigou trade.
A2 also lowered its full-year forecasts. It is now forecasting a full-year profit margin of between 24pc and 26pc compared with a forecast of 26pc to 29pc in December.
It said full-year revenue would be in the order of $NZ1.4 billion compared with a range of $NZ1.4 billion to $NZ1.55 billion previously.
The trans-Tasman dairy company’s overall revenue sank 16 per cent to $NZ677.4m ($631.48m) in the six months to December 31. Meanwhile, net profit tumbled 35 per cent to $NZ120m as COVID-19 travel restrictions stopped the flow of Chinese tourists and students buying A2 products in Australia and sending them back to China.
But that failed to curb demand for A2 products inside the Asian powerhouse. A2’s China-label infant nutrition revenue soared 45.2 per cent to $NZ213.1m, with its market share in China rising 0.7 per cent to 2.4 per cent.
A2’s products are now stocked in 22,000 mother and baby stores.
“Revenue across Asia Pacific was impacted by the challenges experienced in the daigou and CBEC (cross border ecommerce) channels, partly offset by strong performance in the mother and baby store (MBS) channel and a solid performance in liquid milk in Australia.,” the company’s new chief executive David Bortolussi said.
“Despite the disruption and the challenges experienced in the first half, the company continued to record strong brand health metrics in China.”
The collapse of the daigou trade was reflected in A2’s Australia/New Zealand revenue, which plunged 31.1 per cent to $NZ317.2m, while ANZ earnings before interest, tax, depreciation and amortisation tumbled 48.5 per cent to $NZ117.5m.
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6.50am:Fed reports ‘operational error’
The Federal Reserve said an “operational error” disrupted services in several of its business lines, including the electronic settlement system used by banks, businesses and government agencies.
“A Federal Reserve operational error resulted in disruption of service in several business lines. We are restoring services and are communicating with all Federal Reserve Financial Services customers about the status of operations,” said Jim Strader, a spokesman for the Fed’s Richmond reserve bank, said in an emailed statement.
In addition to setting monetary policy, one of the Fed’s lesser-known roles includes acting as a bank for the nation’s banks, as well as for the U.S. Treasury Department. It provides services including collecting checks and electronically transferring funds, and by selling and redeeming Treasury bills.
Dow Jones
6.24am:Facebook to spend $US1bn on news over three years
Facebook said it would spend at least $US1 billion to license material from news publishers over the next three years, a pledge that comes as tech giants face scrutiny from governments around the world over paying for news content that appears on their platforms.
The spending plans are in addition to $US600 million that Facebook paid since 2018 in deals with publishers like the Guardian, Financial Times and others to populate its Facebook News product in some countries, according to a blog post by Nick Clegg, a senior Facebook policy executive.
The social-media giant’s new pledge is similar to a plan Alphabet’s Google announced last year to pay more than $US1 billion to licence news content for its Google News Showcase over a three-year period.
Facebook removed news from its platform in Australia last week as the country’s legislature debated a proposal that would have required Facebook and Google to pay traditional media companies for their content.
Facebook reached a deal with the government Tuesday that would restore news to the platform in exchange for measures like additional negotiation with media companies before binding arbitration kicks in. The revised legislation cleared its last major parliamentary hurdle on Wednesday.
In his blog post, Mr. Clegg said that the proposed Australian law would have required the company “to pay potential unlimited amounts of money” to global media companies under the arbitration system.
“It’s like forcing car makers to fund radio stations because people might listen to them in the car -- and letting the stations set the price,” said Mr Clegg, a former U.K. deputy prime minister.
Facebook intends to strike deals with news publishers to have their stories appear on news products it is developing. Mr Clegg acknowledged concerns about the concentration of power among tech companies and about ways to fund journalism, but he said that “a new settlement needs to be based on the facts of how value is derived from news online, not an upside-down portrayal of how news and information flows on the internet.”
News Corp, the parent of The Australian and The Wall Street Journal, has a commercial agreement to supply news through Facebook. Last week, News Corp. also struck a three-year deal with Google to license content from its publications and produce new products for Google platforms.
Dow Jones Newswires
5.55am:Wall Street turns higher as Powell testifies
US stocks turned higher after Federal Reserve Chairman Jerome Powell reiterated his intention to maintain ultralow interest rates and continue the bank’s asset-purchase policies.
After opening in the red, the major indexes climbed higher after Mr. Powell’s comments on the second day of his Congressional testimony. The Dow Jones Industrial Average rose 1.4 per cent, the S&P 500 gained 1.1 per cent and the tech-heavy Nasdaq Composite added 0.8 per cent.
Speaking to the Senate Banking Committee, Mr. Powell reaffirmed his commitment to keeping easy-monetary policies unchanged for the foreseeable future, and was generally dismissive of any inflation concerns. That gave investors a reason to ignore rising interest rates or worries that an overheating economy would alter the Fed’s thinking.
“There was relief in the market that yields and inflation aren’t going to be as runaway as anticipated,” said Shawn Snyder, head of investment strategy at Citi U.S. Wealth Management.
Stock markets have wavered in recent days following a strong start to the year, with high-flying tech companies leading declines. The Nasdaq has doubled from its lows last March, with companies like Tesla rising even further.
It isn’t at all surprising that investors are choosing now to lock in some of those profits, said LPL Financial strategist Jeff Buchbinder. “We’ve seen this in other bull markets coming off major bear-market lows, “ he said. “It makes total sense to take a breather.”
Investors said a rise in government bond yields, driven by improving growth prospects and rising inflation expectations, has accelerated a rotation out of the tech stocks that led markets higher during the pandemic, and into the stocks best placed to benefit from an end to lockdowns.
The yield on the benchmark 10-year Treasury note, which moves inversely to its price, has risen to its highest level in a year this week. Earlier on Wednesday, it rose above 1.42 per cent, but lately was at 1.393 per cent, from 1.363 per cent Tuesday.
Mr. Powell reaffirmed his commitment to keeping easy-monetary policies unchanged for the foreseeable future, which helped stem heavy losses among tech companies. He continued his Congressional testimony Wednesday morning in front of the Senate Banking Committee.
While the Fed has stuck to the same message since the pandemic hit, the strength of the recovery could prompt it to change course sooner than many investors have been expecting, said Paul O’Connor, head of multiasset management at Janus Henderson Investors.
“Markets are expecting that to be a 2022 story, however we are seeing sizeable upgrades to U.S. GDP. Somewhere in the middle of this year the discussion around tapering is going to have to take place,” he said.
Bitcoin rose 1.4 per cent to $US49,600 after falling 13 per cent Tuesday. Other cryptocurrencies that declined Tuesday, such as ether, also gained.
Overseas, the pan-continental Stoxx Europe 600 index rose 0.5 per cent. Asia-Pacific indexes slipped. The biggest losses were in Hong Kong, where the city’s government moved to capitalise on booming markets by increasing a levy on share trading. Hong Kong’s benchmark Hang Seng Index dropped 3 per cent.
Dow Jones Newswires
5.12am:Volvo, Geely abandon merger plans
Swedish automaker Volvo Cars and China’s Geely Auto said they were abandoning merger plans but said they would reinforce their collaboration on electric vehicles.
“Volvo Cars and Geely Auto have agreed on a wide-ranging collaboration that will maximise the strengths of the Swedish and Chinese automotive groups” but will preserve “their existing separate corporate structures”, the two carmakers said in a joint statement.
In February 2020, Volvo and Geely had announced plans to merge their activities to create an “international group” on the car market.
“Having evaluated different options ... we concluded jointly that a collaboration model between two stand-alone companies is the best way to secure continued growth and at the same time achieve technological synergies in many areas,” Volvo Cars chief executive Hakan Samuelsson said in the statement.
The collaboration will focus, among other things, on the sharing of electric vehicle architecture and autonomous drive technologies.
AFP
5.05am:Adani says mine safely insured despite campaign
Adani Enterprises said that it has secured enough underwriting for its Carmichael coal mine in Australia after some insurers backed away from the project following a pressure campaign from environmentalists.
“Details on insurance providers for the Carmichael project are commercial in confidence, however we have the requisite insurance requirements in place,” an Adani spokesperson told The Wall Street Journal.
The Indian conglomerate’s Carmichael coal mine under construction in Queensland, has drawn fire from activists after authorities greenlighted the project in 2019. The mine will produce some 10 million metric tons of coal a year when finished, according to the website of Adani’s subsidiary Bravus Mining & Resources.
Activists said that at least 31 insurance companies have now refused to cover the mine.
Dow Jones Newswires
5.00am:Stocks bounce back on virus news
European and US stocks were boosted by news that several million doses of a new coronavirus vaccine could be on the way.
After spending much of the day in negative territory, the London stock index closed with a gain of 0.5 per cent.
Frankfurt was up by 0.8 per cent and Paris added 0.3 per cent, while in midday New York trades, the Dow Jones index showed a gain of 0.9 per cent.
Interest rates for benchmark government debt declined, suggesting that “financial markets are much more optimistic about the economy” than the US Federal Reserve, according to Edward Moya, a senior market analyst at the online broker OANDA.
He referred to testimony by Fed chairman Jerome Powell before US lawmakers that showed “Powell is strongly optimistic about the economic outlook for the second half of the year, while the Treasury market seems to indicate that the recovery could take off in the second quarter”.
Financial markets bounced higher after the US Food and Drug Administration (FDA) appeared ready to approve a single-shot COVID-19 vaccine developed by Johnson & Johnson.
If so, a White House official said the administration planned to distribute at least three million vaccine doses next week.
Documents released by the FDA indicated the vaccine had proven highly effective against severe cases of COVID-19 in Brazil, South Africa and the US.
“Basic refrigeration and the fact that it is a single dose vaccine could be a game-changer in the global fight against COVID,” Moya noted.
Oil prices climbed well beyond the 13-month peaks reached Tuesday, and bitcoin rose to almost $US50,000 after sliding the previous day on negative remarks from US Treasury Secretary Janet Yellen.
AFP
4.55am:UK female board members up by half in five years: study
The number of women on the boards of Britain’s top 350 listed companies has jumped by 50 per cent in five years, a government-backed study showed.
There were 1,026 female board members in January, compared with 682 in October 2015, according to a final annual report from the Hampton-Alexander Review.
“There’s been excellent progress for women leaders in business over the last 10 years or more, with boards and shareholders determined to see change,” said the report’s chair Philip Hampton.
“The progress has been strongest with non-executive positions on boards, but the coming years should see many more women taking top executive roles.”
The organisation, which set out to promote higher female representation in the corporate world, added that 34.3 per cent of board positions at the identified firms were held by women, compared with 21.9 per cent five years earlier.
It showed also that females occupied 36.2 per cent of board positions at the 100 firms listed on London’s top stocks index, up from 32.4 per cent in 2019.
For the first time, two FTSE 100 firms have more women on their board than men -- alcoholic drinks giant Diageo and water company Severn Trent.
AFP
4.50am:EU wants to extent ban on roaming charges
The European Commission proposed extending a ban on mobile telephone roaming charges across the EU for an additional 10 years.
The bloc in 2017 ditched the fees that were a major headache for mobile users travelling between European countries in a move hailed as one of the single market’s major successes.
The current rules were due to expire in 2022. They would now be extended for a decade beyond that under the commission’s proposal.
“The end of roaming charges is a prime example of how the EU keeps millions of citizens connected and improves their lives,” EU competition chief Margrethe Vestager said in a statement.
“The new rules will keep roaming at no extra charges and make it even better.” The commission said the new regulation would aim to ensure “consumers will be entitled to have the same quality and speed of their mobile network connection abroad as at home, where equivalent networks are available”.
AFP
4.48am:Heathrow airport dives into £2.0bn annual loss
London’s Heathrow airport dived into a net loss of £2.0 billion last year, a result that “underlines the devastating impact of COVID-19 on aviation”, it said.
The loss after tax, equivalent to $US2.8 billion or 2.3 billion euros, reflected a 73-percent plunge in passenger numbers, Heathrow said in a statement.
The airport, one of the world’s busiest hubs, recorded a net profit of £546 million in 2019.
Heathrow chief executive John Holland-Kaye, who said passenger levels shrunk in 2020 to levels last seen in the 1970s, voiced optimism for the year ahead with Britain vaccinating millions of adults and preparing to exit its virus lockdown.
AFP
4.45am:Chair of Japan automaker Suzuki to step down
Suzuki’s chairman Osamu Suzuki will retire after more than four decades at the helm of the Japanese carmaker, the company said.
The 91-year-old, who married into the firm’s founding family, will leave the post after a shareholder meeting in June and become an adviser, it said.
After he became company president in 1978, Suzuki expanded the automaker’s business in India, where it has had enormous success, and steadily increased its share in Japan’s small car market.
He became chairman in 2000 and his eldest son, Toshihiro Suzuki, assumed the role of president in 2015.
The carmaker, which had once tied up with General Motors and Volkswagen, forged a capital alliance with Toyota in 2019.
No one will replace him for now, while Toshihiro Suzuki will remain president.
AFP
4.40am:UK bank Lloyds logs profit slump on virus hit
Britain’s Lloyds Banking Group reported a slump in 2020 profit due to “significant” economic fallout from the coronavirus pandemic.
Profit after tax nosedived 65 per cent to £865 million ($US1.2 billion, 1.0 billion euros) last year, from £2.46 billion in 2019, LBG said in a results statement.
The bank took a huge £4.2 billion impairment charge which reflected a “significant deterioration in the economic outlook” as a result of the COVID-19 health emergency.
Pre-tax profit tumbled 72 per cent to £1.2 billion, while income tanked by around one third to £29.2 billion.
“The group’s financial performance in the year has been impacted by the pandemic,” said outgoing chief executive Antonio Horta-Osorio, who leaves later this year after a decade in charge.
“The impact of the coronavirus pandemic on the people, businesses and communities in the UK and around the world in 2020 has been profound.
“We remain absolutely focused on working together with all of our stakeholders to support our customers and ensure a sustainable recovery,” he said.
Under Horta-Osorio’s stewardship, the bank slashed thousands of jobs and branches in a vast cost-cutting drive following the global financial crisis, refocusing on retail and business banking that helped it return to profit.
AFP
Miners, banks lift ASX 200; Guzman y Gomez down
Lithium stocks on a tear, led by Rio target Arcadium's big surge. Mexican restaurant operator GYG's Australian sales up 9 per cent. Netwealth's record quarter. Aus Vintage brings back sacked CEO. The ACCC welcomes 'more efficient' mergers regime.
ASX 200 trims gains; Rio Tinto acquires Arcadium Lithium
Rio buys lithium player for $US6.7bn. Commodity price falls, China disappointment weigh on Aussie producers. NZ's central bank cuts rate by 50 basis points, as expected. Shares in Cettire, Zip jump.