ASX edges higher on Woolies, CSL as Afterpay reverses
Strength in Woolworths and BHP helped the market to hold on to gains at the close, as Fortescue shares rose to new heights.
- Online shopping boom offsets AusPost letter weakness
- What to watch at Jackson Hole
- Lion tests local interest for dairy sale
- ANZ names O’Sullivan as new chairman
That’s all from the Trading Day blog for Thursday, August 27. Australian stocks finished higher by 0.2pc after choppy trade, as heavyweights Woolworths and BHP buoyed the market. Eyes are on tonight’s speech by US Fed chairman Jerome Powell at the Jackson Hole summit, putting pressure on the US dollar and helping the Aussie dollar higher.
Locally, it was another busy day for earnings with results released from Woolworths, Nine, Afterpay, Ardent, Bega and Flight Centre, among others.
Damon Kitney 7.07pm: Could Toll split after dire quarter?
Toll Holdings chairman John Mullen says the company’s performance has “bottomed” after its embattled Global Express division lost as much money in the past quarter as it did in the previous year, following the impact of COVID-19 and targeted cyber attacks.
As Toll’s Japanese parent Japan Post has its adviser Nomura testing the market for a potential break-up of Toll ahead of a final decision expected early next month, Japan Post’s latest accounts reveal its Global Express business — which includes the Toll Priority and IPEC operations — lost $101m in the three months to June 30.
The business lost $99m in the entire 12 months to March 31.
Lilly Vitorovich 4.57pm: Nine weighs The Voice in savings drive
Nine Network is looking to dump some of its more pricey television shows such as The Voice and squeeze more sports rights savings as part of a cost cutting drive.
With the free-to-air television market struggling in the wake of a double digit drop in advertising revenue during the coronavirus crisis, the broadcaster’s parent Nine Entertainment is focused on slashing costs.
On an investor call, chief executive Hugh Marks singled out its singing competition show The Voice, featuring singers Delta Goodrem and Boy George, saying it was a “$40m cost in the schedule”.
“As you go forward those shows just, you know, get a little bit more difficult to hold onto,” Mr Marks said Thursday, adding that it’s working through its TV program slate for the next couple of years.
Mr Marks later told The Australian that its long-running renovation competition reality show The Block is “a third of the cost per hour or something like The Voice”, and delivers an equivalent audience.
NEC finished Thursday’s session down 2pc to $1.72.
Read more: Nine bleeds as virus takes toll
4.55pm: APRA imposes new rules on NAB’s MLC
Financial regulator The Australian Prudential Regulation Authority has imposed additional licence conditions on National Australia Bank-owned licensee NULIS Nominees “to improve its governance and control environment”, and ensure members’ best interests are prioritised in its decision-making.
NULIS is the licence that sits above NAB’s wealth arm MLC.
APRA’s actions follow an investigation into matters referred to it by the Hayne financial services royal commission.
The directions and new licence conditions require NULIS to record how it considers members’ best interests when making decisions that materially affect their interests.
It also requires NULIS to undertake “timely remediation” by implementing improvements in its governance and control environment and appointing an independent expert to report on compliance with its licence conditions.
“The Royal Commission formed the view that NULIS’s decisions in relation to the migration of certain cohorts of its members into MySuper products, grandfathering certain fee arrangements, and the charging of fees to members for services that were not provided, may not have been in members’ best interests”.
“While APRA has not concluded that NULIS breached the Superannuation Industry (Supervision) Act 1993, its investigation raised concerns about the adequacy of NULIS’s internal processes for demonstrating how members’ best interests were considered and prioritised”.
4.53pm: Bega leads, Appen lags
Results drove the biggest market movers in both directions, with a miss at Appen hitting shares by 11pc, but a beat for Bega sending shares higher by almost 8pc.
Here’s the biggest movers by the close:
4.14pm: Utilities, energy drag on ASX
Woolworths led the market higher in a volatile session on Thursday, as punters held their breath for guidance from the US Federal Reserve on its rates outlook.
After a lacklustre start, the ASX200 put on as much as 0.71 per cent but settled to gains of 10 points or 0.16 per cent by the close to 6126.2. On the All Ords, shares rose 16 points or 0.26 per cent to 6310.6.
The speech by US Fed chair Jerome Powell at the Jackson Hole symposium will be closely watched as he sets out the central bank’s policy tools to increase its support to the market.
Concern of lower for longer rates weighed on the US dollar and sent the Aussie dollar near 18-month highs. By the close, AUDUSD was up 0.1 per cent to US72.38c.
3.23pm: Macquarie Telecom focuses on data centres
Macquarie Telecom is doubling down on its data centre push, as the shift to the cloud is accelerated by the trend toward more work from home arrangements.
The group today handed down an annual net profit of $13.5m, down 17.5pc on the prior year, as is capex bill jumped by $20m with developments in Macquarie Park and Canberra.
Chief David Tudehope said the projects would build its capacity “enabling it to strongly compete for wholesale customers”.
Still, earnings for the group were up 25pc on the prior year to $65.2m.
Looking ahead, Macquarie said it was confident on growth in government business, amid continued demand from federal agencies, with its expanded Canberra site a key development to meet this demand.
It set out a forecast of $140m to $148m in capex over the current year, a large portion of which is slated for growth, but warned the spending plans would eat into earnings, projecting flat second half earnings compared to the current half.
David Ross 2.47pm: Online boom lifts AusPost profit
Booming parcel volumes have pushed AusPost to a $53.6m profit before tax for fiscal 2020, up 30pc on the previous year as shoppers rely on online stores for their retail fix during the pandemic.
Total revenue across the national postal service grew by more than $500m during the pandemic period, with parcel revenue up 15 per cent.
But the letter side of the business was hit hard, revenue slumping 10 per cent for the full year to $2bn, even after a 10pc boost to basic stamp prices from January.
Costs across the whole group grew by $477m, with significant airfreight charges and additional processing needed to cope with the huge volumes of parcels surging through the national postage network.
AusPost sought to offset some costs by implementing business efficiency programs across the group, saving $220m for the year.
The national postal service received temporary relief from its daily delivery requirements, but has since campaigned to make that move permanent.
Read more: Australia Post bosses get blast from Senate inquiry
2.42pm: What to watch at Jackson Hole
The Kansas City Fed’s 44th annual Economic Policy Symposium tonight is shaping up to be an important moment in monetary policy history, as Chair Powell prepares to deliver an update on what appears to be near-final changes to the FOMC’s inflation targeting framework, says Morgan Stanley chief US economist Ellen Zentner.
The virtual Jackson Hole conference on ‘Navigating the Decade Ahead: Implications for Monetary Policy” is set up to be a “prime opportunity for Chair Powell to preview upcoming inflation framework changes before rolling them out officially at the September FOMC meeting”.
Her view that an important announcement is coming has been further bolstered by a series of public appearances that have been scheduled for the aftermath of Jackson Hole – including Vice Chair Clarida, Governor Brainard alongside former Fed Chairs Yellen and Bernanke, and New York Fed President Williams alongside former President Dudley – “all the key personnel we would expect to speak on the back of a major framework announcement”.
“We believe that the FOMC is poised to deliver important new information about the forthcoming conclusion of the inflation framework review, and that information will convey that the Committee is on the precipice of shifting to a flexible average inflation targeting approach and, recognising the challenges and drawbacks of specifying a fixed look back period, the FOMC will aim for near 2 per cent inflation, on average, over the business cycle,” Ms Zentner says.
She expects this new framework to be formally adopted in the FOMC’s official Statement on Longer-Run Goals and Monetary Policy Strategy at its September meeting and that it will open up another runway for the FOMC to deliver new forward guidance in December.
“That guidance will likely indicate that the Fed will maintain interest rates in the current target range until inflation sustainably reaches 2pc in the context of a broad labour market recovery that is consistent with the FOMC’s maximum employment goal.”
In that case, the prospect of lower for longer US interest rates will arguably be positive for US equities as it would placate nascent fears of a rise in bond yields from growing US fiscal stimulus crimping stock market valuations.
Lachlan Moffet Gray 2.27pm: Slater and Gordon falls to $1.2m loss
Listed law firm Slater and Gordon has swung to a full year loss after recording costs related to the transformation of the company and normalising its incentive programs.
A net loss after tax of $1.2m was recorded, compared to a profit of $31.3m in 2019, although that result was bolstered by the recognition of a deferred tax asset of $31.5m.
EBITDA increased to $28.1m from $17.5m in 2019, bolstered by a 66 per cent increase in gross operating cashflow to $27.6m.
The compensation firm said that COVID-19 did not have an impact on operations, attributing the loss to “significant investment in the Company’s business-wide transformation program and digital strength”, as well as increased labour costs, with total expenses jumping $18m to $178.5m.
Over the year the firm delivered $700m in personal injury compensation and announced $250m in class action settlements.
Chair James MacKenzie said the results showed the company was continuing to improve.
“The work that we have undertaken to continue to transform the Company is delivering results and we are firmly focused on the future,” he said.
“The Company has a strengthened balance sheet and is seeing positive organic growth.”
SGH shares last up 5.5pc to $1.25.
Lachlan Moffet Gray 2.02pm: Two COVID-19 cases at JPMorgan
JPMorgan has recorded a further two cases of COVID-19 in its Sydney Office, the Australian has confirmed.
It comes after a staff member was diagnosed earlier in the week, with employees who worked on the same flaw as the initial infected person told to work from home on Tuesday morning.
The Australian understands that the additional two cases worked on that same floor, which remains closed for deep cleaning.
The remainder of JPMorgan’s Sydney Office on Castlereagh Street remains open, although the majority of staff are working from home.
1.51pm: iSelect collapses to $43m loss
Insurance and energy comparison site iSelect has written down its energy business and warned of continued weakness across its key verticals from COVID-19 uncertainty as its loss blows out to more than $43m.
Handing down its full year results, the group posted a loss of $43.5m, a collapse from last year’s $3.66m loss as it wrote down its goodwill by $18.8m and its divested iMoney business by $23.1m.
Earnings rose by $13.7m for the year, including $3.7m in JobKeeper subsidies.
The group sold iMoney earlier this month to one of the founders of the business for a nominal value, saying the segment was no long aligned with iSelect’s strategy “especially considering operation an other impacts of COVID-19 on the Asian market”.
Still, chief Brodie Arnhold said changes made to the group’s operating model were paying off, with earnings of $2.6m in July (including JobKeeper), with momentum continuing in August.
“While the market is beginning to show resilience, bouncing back from the lows of COVID-19 in March and April, the extent of this recovery is still dependent on efforts to contain the virus and the outlook for the underlying economy,” Mr Arnhold said.
“In this uncertain economic environment, iSelect’s service is more relevant than ever as Australian households look to reduce the financial pressure and find ways to save on their bills and expenses.”
ISU shares last up 5.8pc to 27.5c.
1.30pm: ASIC provides regulatory relief for IPOs
Securities regulator ASIC has pledged relief to companies planning to IPO, in an attempt to pep up the ailing sector.
The ASX reported a 28 per cent drop off in initial capital raised through fiscal 2020, as prospective market entrants were put off by the market volatility associated with the pandemic.
Just 83 companies joined the bourse in 2020, compared with 111 in the previous year.
As such, ASIC today said it would reduce the red tape for companies undertaking an initial public offer, in relation to voluntary escrow arrangements and pre-prospectus communications.
“Given the significant costs involved in undertaking an IPO, our new legislative relief will help reduce the regulatory costs for companies considering going public, while upholding an orderly and transparent market,” commissioner Cathie Armour said.
1.11pm: Collins Foods weighs Sizzler’s future
Fast food franchise owner Collins Foods says its Sizzler restaurants were the most impacted by COVID-19, with the future of the buffet-style chain up in the air.
Speaking at its annual general meeting this morning, chairman Robert Kaye touted the strength of the group’s KFC brand during the pandemic, but said the full-service, dine-in Sizzler restaurants were a drag on the company’s results.
“Collins Foods continues to assess the non-core status of the Sizzler Australia business and closely monitor the pace of sales recovery,” he told investors.
In addition, Mr Kaye said Collins had exited the Chinese market due to the impact of COVID-19, leaving royalties from 67 restaurants in Asia across Thailand and Japan.
He said Taco Bell sales were recovering to close to pre-COVID-19 levels, with continued refinements to its menu and operations as it grows its Australian presence.
CKF last traded down 0.1pc to $10.56.
Read more: Collins Foods soars as customers say KFC
1.01pm: ASX rebound cools with US futures
A rebound in Australian shares has been capped by a fall in US stock index futures.
The S&P/ASX 200 is up 0.5pc at 6144 after rising 0.7pc intraday, with S&P 500 futures down 0.3pc and Nasdaq futures down 0.4pc.
Hurricane Laura is near Category 5 strength with 241kph winds before expected landfall in Louisiana tonight, but WTI crude oil futures are trading slightly weaker.
Value stocks are still struggling for traction after absorbing multiple transition portfolios in recent days, with Energy, Real Estate and Financials in the red.
But growth stocks are certainly back on track in the ascendancy with CSL up 2pc after its recent 4-day fall.
12.42pm: Grocery, liquor sales will remain elevated
Grocery and liquor sales are likely to remain elevated over the next 12 months as consumers continue to spend more time at home even after the government imposed lockdowns, according to S&P.
After Woolworths this morning reported a 57 per cent profit dive, the ratings agency said the home consumption spike would moderate after panic buying in the March quarter, but would remain elevated given somewhat restricted social movements.
Still, it said COVID-19 costs would continue to restrain the chain’s margins.
“The spike in sales growth across all key businesses during the peak pandemic periods required Woolworths to incur incremental costs of around $400m,” it said.
“While these costs will moderate over the next 12 months, we expect cleaning, security, supply chain, and staff safety related costs to remain elevated into fiscal 2021.”
S&P added that the group’s planned acquisition of a stake in PFD “will bolster the scale and reach of the core food business”.
“We expect Woolworths to be able to leverage its logistic capabilities, distribution network, and online platform to materially increase wholesale revenues.
WOW last up 2.4pc to $40.20.
Read more: Woolies profit sinks 57pc, dividend trimmed
12.31pm: UK interest in Aussie bonds rising
Figures released by the Australian Office of Financial Management show a little over 46 per cent of the buyers of this week’s monster $21bn 10-year bond were offshore investors.
The bond issue was a record with most offshore investors (22.7 per cent come) coming from Asia ex-Japan.
There was growing interest from UK investors (9.9 per cent) while just 0.7 per cent were from Japan.
Here is the breakdown by location:
- Asia ex-Japan 22.7pc
- Europe 3.5pc
- Japan 0.7pc
- North America 9.3pc
- UK 9.9pc
- Others 0.1pc
By investor type:
- Banks – trading 21.8pc
- Bank – balance sheet 19.3pc
- Fund managers 30.7pc
- Central banks 5.6pc
- Hedge funds 19.7pc
- Others 2.8pc
Patrick Commins 12.23pm: A third of businesses worried about bills
More than a third of businesses expect they will have difficulty paying their bills over the coming three months, including 70 per cent of hospitality firms.
The Australian Bureau of Statistics’ latest “business impacts of COVID-19” survey revealed that small and medium-sized enterprises were the most likely to say they were pessimistic about meeting their financial commitments, at 35 per cent and 33 per cent, respectively, versus 18 per cent of large firms.
The ABS survey was carried out over the week to August 19 after the implementation of Melbourne’s stage four lockdown and the closure of interstate borders.
Aside from the accommodation and food services sector – which in Victoria has once again been effectively shut down – the industries most pessimistic about their ability to pay bills over the next few months were the transport, postal and warehousing – which would include the devastated aviation industry – and arts and recreation sectors, at 56 per cent and 48 per cent.
Amid climbing uncertainty around the pace of the post-COVID economic recovery, almost a quarter of businesses reported they had decreased or cancelled their actual or planned capital expenditure compared to three months earlier, the ABS said.
11.43am: Capex data beat estimates
Australia’s June quarter private new capital expenditure data have exceeded low expectations.
Second quarter business investment fell 5.9pc versus a 8.2pc fall expected by economists and firms estimate they will spend $98.6bn in 2020-21 versus $93.5bn expected.
Markets aren’t reacting though. The Australian dollar is little changed around US72.40c, 10-year bond yields are down 5bps at 0.90pc after the RBA bought bonds for the first time in two weeks and the S&P/ASX 200 is up 0.6pc after early gains.
11.30am: Results add to positive momentum
Shares are shaking off a lacklustre open to build to gains of 0.6 per cent, with today’s company result releases helping to drive positive momentum.
The ASX is higher by 40 points or 0.66 per cent to 6156.7.
Bega is an outperformer despite its legal cost blowouts, while Appen is taking a 13pc tumble from its record highs after its results fell short of expectations.
Here’s the score in midmorning trade:
| COMPANY | % CHANGE | LAST TRADED |
| Bega | 6.17 | $5.16 |
| Atlas Arteria | 5.19 | $6.69 |
| Platinum Asset Management | 3.61 | $3.73 |
| Independence Group | 3.24 | $4.62 |
| Woolworths | 2.73 | $40.34 |
| Mesoblast | 2.33 | $5.27 |
| Air NZ | 1.96 | $1.30 |
| Ramsay Health | 1.46 | $66.57 |
| Flight Centre | 0.56 | $12.68 |
| Sandfire Resources | 0.21 | $4.87 |
| Afterpay | -1.18 | $89.65 |
| Nine Entertainment | -3.13 | $1.70 |
| Link Administration | -9.55 | $3.98 |
| Appen | -12.78 | $37.94 |
David Ross 11.23am: Positive loan deferral trends: Auswide
Regional Bank Auswide has posted a profit of more than $18.5m after only taking a small hit from the impacts of the pandemic to potential loan losses.
The Bundaberg-based bank, which listed in 2015, grew its loan book over the past year by 4.3 per cent with increased exposure to the Sydney housing market diversifying its exposure from the Queensland market.
Total provisions sit at $9.3m, with an additional $2.3m set aside in recent months to cover potential COVID-19 induced losses, with most of the exposure to mortgages. Total provisions cover about 9 per cent of borrowers.
Auswide chief Martin Barrett said the bank was now contacting its customers, but warned for some the bank would be forced to foreclose if they could not return to payments and chose not to sell their houses.
“We’re a good way through making calls to our customers to see what further support they’ll need beyond September, the trend has been looking pretty positive,” he said.
“No bank wants to foreclose on a customer it’s far better for customers to come to realisation that it’s better to sell their home in a controlled and defined sort of way.”
Like many other financial institutions bank deposits have grown strongly on the back of government support and direct deposits, up 10.4 per cent to $2.62bn for the year.
The growth of customer deposits has boosted the banks capacity to cover funding costs up to 74.5 per cent from 71.4 per cent the year before.
A final dividend of 10.75 cents, fully franked, will be paid.
Samantha Bailey 11.05am: Pental profit jumps in ‘virus killing’ blitz
Pental, the maker of White King bleach and Pears soap, has more than doubled its annual profit and upped its dividend as it flagged continued sales momentum through the 2021 financial year.
Unveiling a net profit after tax of $5m for the 12 months through June, compared to $1.9m the prior year, Pental said sales lifted strongly for the period, thanks to an increase in demand for it’s Australian-made disinfectant products amid the coronavirus crisis.
Pental, whose brands also include Velvet and Country Life, declared a full-franked final dividend of 1.5c a share, up from 1.3c the prior year. The company paid a special dividend of 0.7 cents per share earlier this month.
“We are very pleased to be able to service our Australian and New Zealand communities during these challenging times by making locally manufactured high quality strong germ and virus killing products available while international supply chains were interrupted,” Pental managing director Charlie McLeish said.
“On top of ramping up our production to address surge in demand, we managed to create new products from concept to launch within a space of six weeks which is a great achievement by our team.”
The company said that it had made a step towards growing its exports to China and was in the early stages of supply with a large distributor that could provide more scale into the Chinese market, where Australian brands are well regarded.
PTL shares last up 11.8pc to 47.5c.
Read more: Pental to pay special dividend after sales soar
Perry Williams 10.57am: Another US writedown for Atlas Arteria
Atlas Arteria has taken another writedown on its troubled US toll road and sunk to a first half loss as commuter traffic slowed amid the COVID-19 pandemic.
Atlas Arteria, previously known as Macquarie Atlas Roads, said it would take a $152m impairment on its 22km Dulles Greenway toll road connecting Leesburg to Washington DC in Virginia after taking a $165m charge on the same road at its annual results in February.
The Melbourne-based company fell to a statutory first half net loss of $123m after tax from a $88m loss for the same period a year ago. Underlying net profit after tax fell to $9m from $88m for the first half of 2019.
Traffic on Dulles Greenway suffered a “significant and sustained reduction” of 42 per cent due to the pandemic with uncertainty over the timing of an economic recovery leading to the decision to take the hefty writedown. Atlas expects a decision in early 2021 on a request for a toll price hike, RBC noted.
ALX last traded up 6.3pc to $6.76.
Lachlan Moffet Gray 10.44am: Flexigroup raise draws mixed opinion
DataRoom | Flexigroup’s capital raising and strategic review of its Commercial and Leasing division has received measured praise from analysts, who say the group will benefit if capital is applied well as the company transitions to becoming a Buy Now Pay Later provider.
As DataRoom reported on Wednesday, Flexigroup – soon to be renamed humm – will seek to raise $140m of equity while reviewing its legacy commercial and leasing division, which could lead to a potential sale to suitors including Affinity Equity Partners, Kohlberg Kravis Roberts and Japan’s Shinsei Bank.
Analysts from Macquarie said in a note that Flexigroup’s capital raise, although dilutive, would strengthen the balance sheet ahead of economic uncertainty while the review of its commercial and leasing business, potentially leading to a sale, would “make sense” as it would reduce the dilutive impact of the raise.
“The $140m equity raising strengthens FXL’s balance sheet as we enter a period of economic uncertainty, however it is 26pc to 31pc dilutive,” the analysts said.
“FlexiGroup are undertaking another strategic review of the Commercial & Leasing division. If there was interest in the asset, we believe a sale would’ve made sense, with proceeds reducing the dilutive impact of the raise”.
Despite expressing support for the raise, the analysts said its size “raised questions” about the potential of the proceeds to be required to fund expected losses and thought it unlikely that it would drive any immediate uplift in earnings.
Read more: Affinity, KKR likely Flexigroup tyre-kickers
David Swan 10.36am: BNPL boom lifts Zip revenue
Zip’s revenues – and losses – continue to mount, with the highly traded buy now, pay later provider posting record full-year revenue of $161m, while losses before tax climbed to $44.9m.
In its full-year results for the year ending June 30 2020, Zip declared it had “emerged as a global BNPL leader”, recording total transactions of $2.1bn, up 87 per cent year-on-year. The company said it now has more than 2.1 million customers and nearly 25,000 partners on its platform.
Revenue was up 91 per cent year-on-year to $161m for the year ending June 30 2020, while “bad and doubtful debts” increased by $17m to $53.7m.
The company is up 2.8pc to $9.90 in early trade, after a record day on Wednesday in which the company closed up 27.5 per cent on news of a new partnership with eBay.
The company said it had demonstrated ‘strong resilience’ throughout COVID-19, delivering positive cash EBITDA while growing into new markets, including the US through an upcoming expected acquisition of New York-based QuadPay.
Read more: Zip up 31pc on eBay partnership, SME platform
10.11am: Financial weakness dampens early boost
Shares have fallen well short of their expected early boost, trading flat at the open as banks move lower again.
In early trade, the ASX200 is higher by 4 points or 0.07pc to 6120.5.
Commonwealth Bank is weighing with a 1pc slip, as Appen takes a 13pc hit from its below consensus results, and ANZ drops 1.5pc.
On the upside, Afterpay is setting new highs again, touching $95.97 in opening trade while rival Zip rises 2.8pc to $9.90.
Bega Cheese is rising 8pc, Altas Arteria up by 4.5pc, Mesoblast higher by 5.4pc and Woolworths rising 2pc after their results.
But Link Administration is down 7.8pc, Whitehaven lower by 5pc, and Nine Entertainment down 4pc.
Richard Gluyas 10.08am: ANZ names O’Sullivan as new chairman
ANZ has named a new chairman, appointing Paul O’Sullivan to replace David Gonski in October.
Mr Gonski has served in the role for the past six and a half years.
His succession plan, flagged by The Australian last month, will install fellow Singapore Inc alumni Mr O’Sullivan, 59, following finalisation of the group’s full-year results.
ANZ’s leadership has been a rare oasis of stability through the nightmare of the Hayne royal commission and Austrac’s no-nonsense take-down of the Westpac and Commonwealth Bank boards.
Read more: Will chairman David Gonski’s personal stamp on ANZ endure?
10.03am: IOOF halted for transaction
Wealth manager IOOF shares placed in trading halt with the wealth manager asking for the halt “pending an announcement … in relation to a potential significant transaction”.
The halt is to remain in place until next Monday or before an announcement to the market. The Australian’s DataRoom column revealed on August 3 that IOOF had expressed an interest in the sales process for NAB’s MLC wealth management business, however there is a mismatch as MLC, which is expected to sell for up to $3bn compares to IOOF’s $1.6bn market value.
MLC is NAB’s wealth management arm and has been up for sale through Macquarie Capital and Morgan Stanley.
Read more: Minnow sizing up MLC
Jared Lynch 9.57am: Bega legal costs weigh on annual result
Bega Cheese has added an extra $15.2m to its legal bill for its peanut butter wars with US food giant Kraft and the world’s biggest dairy exporter Fonterra, taking total costs $41.2m in the past two years.
Kraft has appealed against a federal-court decision that allowed Bega to continue to use the branding, colours and style of the classic jar of Kraft Peanut Butter, lining lawyers’ pockets in the process.
At the same time, Bega is fighting Fonterra, after the New Zealand company claimed the use of Bega’s logo on that same peanut butter jar contravened a licensing deal the pair struck in 2002.
“We were pleased to receive a favourable decision in our legal dispute with Kraft from the full court of the Federal Court of Australia in April,” Bega executive chairman Barry Irvin said.
“Kraft has now sought leave to appeal to the High Court. The High Court has set a date in mid-November 2020 to hear the application.
“The dispute with Fonterra regarding the Bega brand continues. The trial in the Supreme Court of Victoria completed in July 2020 and we are now awaiting judgment.”
Bega acquired most of Kraft’s Australian food operations, including Vegemite, for $460m in 2017, but Kraft said that did not include their peanut butter trademarks and branding, despite the company withdrawing their own branded spread from supermarket shelves at the time of the sale.
9.49am: Flight Centre falls to $849m loss
Travel agency Flight Centre has detailed the hit from the coronavirus pandemic, with international and domestic border restrictions pulling the company to a $849m statutory loss.
Handing down its full year results this morning, Flight Centre said it had been tracking well pre-pandemic, with profits of $150m wiped out in March and dragged lower in the final quarter.
It described the current period as “the most challenging trading environment the company has experienced in its almost 40 years of business”, with total transaction value down 36pc on the previous year at $15.3bn as bookings were cancelled from March.
Looking ahead, the group said domestic border restrictions were holding back any recovery in Australia, even as demand across its entire group saw some uplift.
“Travel is starting to gradually recover in locations like North America, Europe and South Africa, where domestic borders are now open, although we are also seeing heightened restrictions in Australia and New Zealand, after earlier relaxations,” chief Graham Turner said.
“Costs have reached the targeted level and we have capacity to service about 40pc of normal TTV with the current cost base, which means we will be able to reach a break-even position without incurring significant additional expenses.”
9.40am: Upside risk for Aussie shares
Australia’s share market has upside risk from strong gains on Wall Street notwithstanding a flat open projected by overnight futures relative to fair value.
Strong results and updates so far from Afterpay, Appen, Bega Cheese and Woolworths will add to the positive mood, although Ramsay Healthcare, Link Administration and Atlas Arteria results look disappointing.
Nine Entertainment and Collins Foods may outperform after Nine said the ad market was ahead of expectations so far this financial year, and Collins Foods said KFC stores are performing well.
S&P 500 futures have slipped 0.2pc in early trading and there are concerns about the narrow leadership of the US share market, but the Australian market arguably has a lot of catching up to do.
Tuesday’s 0.7pc fall in the S&P/ASX 200 was exaggerated by multiple transition portfolios in multiple value funds and a growth fund, according to Bell Potter’s Richard Coppleson.
If that selling is complete, the S&P/ASX 200 could rise much more than expected today, potentially testing the six-month high of 6199.2 reached on Tuesday.
While a daily close above that point would be a very positive development on a technical basis, earnings estimates would need to improve dramatically to validate record PE high valuations.
Interestingly, the S&P 500 VIX index rose 1.2 points to 23.27pc last night despite a 1pc rise in the S&P 500. That might be an early sign of caution.
But it’s hard to imagine Fed Chair Powell saying anything to upset the apple cart in his virtual appearance at Jackson Hole economic policy symposium tonight.
If signals that policy tools like yield curve control, average inflation targeting or outcome-based guidance are under consideration, shares could have another leg up.
Coles, JB Hi-Fi and REA Group trade ex-dividend.
9.34am: What’s on the broker radar?
- Ansell price target raised 50pc to $43.50- Citi
- Eagers Automotive cut to Hold – Bell Potter
- Eagers Automotive raised to Buy – Moelis
- Home Consortium cut to Neutral – Credit Suisse
- Wagners cut to Neutral – Credit Suisse
- Western Areas cut to Hold – Bell Potter
- Whitehaven Coal cut to Buy/High Risk – Citi
Jared Lynch 9.26am: Elective surgery bans dent Ramsay profit
Widespread elective surgery bans across the globe have hit Australia’s biggest private hospital operator Ramsay Health Care hard, fuelling a near halving of the group’s profit and scratching of its dividend.
Chief executive Craig McNally labelled the COVID-19 pandemic as “one of the most remarkable periods” in his 33-year career as the major revenue driver of private hospitals, elective surgeries, began drying up in March.
While the federal government gave private hospital operators a “viability guarantee” in exchange for treating public patients during the pandemic, this funding only covered costs, leaving no cash to pay for staff training, debt or invest in equipment.
As a result, Ramsay’s net profit tumbled 47.9 per cent to $284m in the year to June 30, with its Australian and Asian operations the hardest hit, reporting a 23.2 per cent slide in earnings.
Mr McNally said the hospital group was “tracking well” until the end of February when the COVID-19 pandemic began to escalate.
Read more: Hospitals facing 18-month backlog of elective surgery
David Swan 9.19am: Appen cashes in on AI demand
Artificial intelligence training provider Appen has lifted its net profit by 20 per cent, with the company taking advantage increasing demand for AI from the tech giants.
In its first-half results for FY20 Appen said the pandemic had a ‘negligible’ negative impact on its numbers, and that COVID-19 had accelerated growth for relevant sectors including technology and e-commerce.
Revenue was up 25pc to $306.2m, while underlying earnings before interest, taxation, depreciation and amortisation (EBITDA) was up 6pc to $49.1m. Appen posted net profit after tax of $22.3m, up 20 per cent year-on-year.
The company declared an interim dividend of 4.5 cents per share, 50 per cent franked, up 12.5 per cent.
The 20-year-old Sydney-based tech outfit provides human annotated datasets for machine learning and artificial intelligence, and is one of the so-called ‘WAAAX’ ASX high-growth tech stocks.
It doesn’t disclose its customer list but it’s thought to service the likes of Amazon and Apple.
Appen last traded near record highs at $43.50, giving the company a valuation of $5.29bn.
9.14am: Nine warns of heavy ad drop
Nine Entertainment said TV ad revenue is likely to fall heavily in the first quarter of fiscal 2021 after it was dragged to a huge annual loss by impairments, primarily against its free-to-air TV business.
The media conglomerate on Thursday reported a net loss for the 12 months through June of $590m, compared with a $221.2m profit a year earlier. The largest component of $701.9m in one-off items was a $591m non-cash impairment of intangibles, including a goodwill writedown of about $300m relating to Nine’s free-to-air television business.
Stripping out accounting changes, revenue fell 7.3pc to $2.170.6bn.
Nine said advertising market conditions were performing ahead of earlier expectations and appeared poised to recover when coronavirus conditions stabilise. Nonetheless, it currently expects September quarter free-to-air revenues to fall by about 15pc on-year due to continued weakness in advertising markets.
Nine declared a final dividend of 2.0 cents per share, compared with 5 cents a year earlier.
Dow Jones Newswires
John Durie 9.01am: Lion tests local interest for dairy sale
Lion Australia has put its dairy business back on the block to test offers for a quick sale following the Federal Government’s rejection of the planned $600m sale to Chinese based Mengniu.
Lion has decided to test local interest to ensure a sale without triggering regulatory delays.
At least two parties have expressed interest including John Wylie’s Tanarra Capital and Bega Cheese but other offers are expected.
A joint bid is possible with some assets like flavoured milk attractive to the likes of Coca-Cola Amatil.
If no suitable offer is forthcoming in the short term the company will hang on the asset under its highly regarded boss Kathy Karabatsas.
The Lion Dairy assets include a cold storage distribution chain in service stations and corner stores, Berri fruit juices, Big M flavoured milk and fresh milk under the Pura name or house brand sales to supermarkets,
Federal Treasurer Josh Frydenberg told both Mengniu and Lion he was not keen on the sale on unexplained “food security grounds”.
This is despite the fact he cleared the $1.5bn Mengniu acquisition of Bellamy’s baby milk powder in November.
Read more: Lion Dairy back up for sale after Frydenberg rejection
Eli Greenblat 8.39am: Woolworths profit slumps 56pc
Woolworths full-year net profit for 2020 has dropped 56.7 per cent to $1.165bn and the retailer has sliced its final dividend to 48 cents per share, down 15 per cent, as it set about restructuring its hotels, pubs and liquor store business to prepare for a demerger.
The nation’s biggest retailer said total revenue for the year rose 6.2 per cent to $63.675bn as profit from continuing operations fell 21.8 per cent to $1.165bn.
The COVID-19 pandemic saw shoppers switch to online shopping, helping Woolworths various digital platforms, with online sales across its divisions up 39.1 per cent to $3.523bn and now making up 5.5 per cent of total group sales, up from 4.2 per cent in 2019.
At its core Australian supermarkets business sales rose 6.3 per cent to $42.151bn while Big W reported an 8.2 per cent lift in sales to $4.1bn and its Endeavour Drinks liquor division posted an 8 per cent rise in sales to $9.27bn.
Meanwhile, the hotels arm, which faced major shutdowns because of the COVID-19 pandemic saw its sales slump 21 per cent to $1.32bn.
The general merchandise chain BIG W was profitable for the first time in four years, posting earnings of $39m, from a loss of $85m in 2019, while earnings at its supermarkets rose 22.2 per cent to $2.232b, earnings at Endeavour Drinks increased 12.9 per cent to $569m and Hotels earnings dropped 34.3 per cent to $172m.
Jared Lynch 8.34am: Mesoblast trims loss
Stem-cell focused Mesoblast has narrowed its annual loss for the 2020 financial year, booking an after tax loss of $US77.9m, compared to $US89.8m a year ago.
Revenue lifted 92 per cent to $US32.2m for the period.
The group says it is on track to release its drug to treat patients with potentially lethal COVID-19 complications by the end of the year.
Chief executive Silviu Itescu said the company was working with the US Food and Drug Administration, which is set to decide on approving its drug remestemcel-L next month.
Already the FDA’s advisory committee as voted in favour of the drug’s efficacy 9:1. The vote was on remestemcel-L’s application for treating children with steroid-refractory acute graft versus host disease (aGVHD), which has a similar immune response seen in patients with severe complications from coronavirus.
Mesoblast is currently completing phase three trials in the US to test the efficacy of remestemcel-L on COVID-19 patients suffering the potentially lethal acute respiratory distress syndrome.
About 300 patients are enrolled in the trial and early next month Mesoblast is expected to reveal their initial results, and if the strongly support its hypothesis, it will then seek to have it approved as a treatment for COVID-19 as well a graft-versus-host disease.
Shares in the dual Nasdaq-ASX listed biotech rallied earlier this month after the Oncologic Drugs Advisory Committee and the United States Food and drug Admiration approved remsestemcel-L for children.
Mesoblast’s NYSE-listed shares jumped 3.8 per cent in overnight trade to $US18.33.
Read more: Mesoblast to launch COVID-19 drug by end of year
Eli Greenblat 8.30am: City Chic profit down 40pc
Women’s fashion retailer City Chic has posted a 39.6 per cent slide in full-year net profit to $9.657 million as its accounts showed the impact of the divestment its Noni B business in 2018, with the retailer quickly expanding into the US and growing sales strongly in 2020.
The company said full-year sales were up 31 per cent to $194.5m with like for like store sales better by 0.4 per cent.
City Chic decided to skip a final dividend to preserve cash.
City Chic continues to have one of the highest proportion of sales coming from online, with online penetration now at 65 per cent of total sales, up from 44 per cent in 2019, and the recent burst in online shopping during COVID-19 driving its digital sales.
The company reported underlying EBITDA of $26.5m, up 6.6 per cent.
Store closures in Australia and New Zealand because of COVID-19 saw sales fall by 4.8 per cent in those regions with sales growth of 9.9 per cent in the first half followed by a 21.5 per cent slide in the second half.
8.20am: Sandfire profit falls 30pc
Sandfire Resources said its net profit fell by 30pc, led lower by an impairment of some oxide copper stockpiles and regional resources.
Sandfire reported a net profit of $74.1 million for the 12 months through June, which was dragged down by an impairment charge of $23.6 million that was first announced in its June quarter report last month.
Directors of the company declared a final dividend of 14 cents a share, down from a payout of 16 cents at the corresponding stage of fiscal 2019.
Dow Jones Newswires
8.15am: Flight Centre dives to loss
Travel agency Flight Centre Travel Group posted a large loss in the recently concluded fiscal year as the coronavirus pandemic slammed the travel industry.
Flight Centre said its statutory loss was $662 million in the year through June, compared to a $263 million profit in the prior year.
On an underlying basis, which strips out one-time items, its loss after tax was $378 million, compared to a $266 million profit in the prior period. Total transaction value was $15.3 billion, down 35 per cent.
Flight Centre didn’t declare a final dividend.
The company said it couldn’t provide earnings guidance for fiscal 2021, which started in July, because of uncertainty around when governments might lift travel restrictions. However, it said recent cost-cutting measures should allow it to break even if it achieves 40 per cent of its usual transaction value.
Dow Jones Newswires
David Swan 7.50am: Afterpay halves loss, doubles users
Buy now, pay later star Afterpay has halved its annual net loss to $19.8m, in a year where heavy investment in geographical expansion saw active customers more than double.
Full year EBITDA soared 73 per cent to $44.4m.
Meanwhile, underlying sales revenue of $11.1bn also lifted by more than 100 per cent year-on-year, from $5.2bn.
Active customers at June 30 grew to 9.9 million, from 4.6 million in the prior year.
It came as Afterpay worked to expand its foothold in the US and UK, and prepared launches into the Canadian and European markets.
Afterpay also confirmed a highly expected push into Asia, announcing it would acquire Indonesian BNPL provider EmpatKali as part of “initial steps to explore select opportunities in Asian markets.”
Afterpay shares last traded at $90.72 each, more than double their highs around $39.44 hit prior to the sharemarket’s collapse in March.
7.40am: Air NZ reports 2020 loss
Air New Zealand reported a loss for the 2020 financial year as Covid-related travel restrictions resulted in a drop in passenger revenue that drove operating losses.
The company reported a loss before other significant items and taxation of $NZ87 million for the 2020 financial year, compared to earnings of $NZ387 million in the prior year.
“Given current financial pressures as the airline manages the impact of COVID-19, the board has determined that it will not declare a final dividend for the 2020 financial year,” the company said in a press release.
Air New Zealand said it isn’t currently able to provide specific 2021 earnings guidance, but current scenarios suggest a loss in 2021.
“Despite reporting a strong interim profit of $NZ198 million for the first six months of the financial year, and seeing positive demand on North American and regional routes early in the second half, Covid-related travel restrictions resulted in a 74pc drop in passenger revenue from April to the end of June compared to the prior year, which drove the airline’s operating losses,” the company said.
Cash burn averaged approximately $NZ175 million per month from April to June, it said, including higher-than-average refunds, redundancy payments and fuel hedge close-out costs, but this reduced to $NZ85 million for July.
The airline said it is estimating the go-forward average monthly cash burn in the range of $NZ65 million to $NZ85 million “while international travel restrictions remain and assuming resumption of domestic travel with no social distancing requirements, as well as a continuation of government-supported cargo flights.”
Dow Jones Newswires
7.20am: Vanguard scales back in Asia
Vanguard Group, the index-tracking giant, is scaling back in Asia, as it plans to close its operations in Hong Kong and Japan.
The closures will leave Vanguard, which managed more than $US5.9 trillion in assets at the end of May, with regional offices in mainland China and in Australia. It closed its Singapore office in 2018.
The company said in a statement that it would wind down its Hong Kong operation, “which primarily serves institutional clients, and not the individual investors that are our primary strategic focus.” It said this would take six months to two years, and would lead to job cuts.
“Our future focus in Asia is on Mainland China and our primary office in Asia will be in Shanghai,” a spokeswoman said in an email.
Vanguard said it would make an orderly exit from its investment platforms in Hong Kong, which include six locally listed exchange-traded funds. It also operates retirement funds, known as mandatory provident funds, and index-tracking collective investment schemes.
Dow Jones
6.20am: ASX to open higher
Australian stocks are tipped for modest opening gains after another record-breaking night on Wall Street.
About 6am (AEST) the SPI futures index was up 17 points, or 0.3 per cent.
On Wednesday, the ASX finished 0.7 per cent lower under the weight of the major banks and ex-dividend trade in Telstra, Suncorp and AGL.
The Australian dollar is higher at US72.34.
Brent oil is down 0.5 per cent to $US45.64 a barrel, while spot iron ore declined 1.4 per cent to $US123.25.
6.20am: Nasdaq, S&P hit new highs
Wall Street’s ebullient optimism continued, with all three major indexes closing with gains and dual records again set by the Nasdaq and S&P 500.
The S&P 500, buoyed by data pointing to a US economic recovery, climbed 1.02 per cent as of the 4pm close of trading in New York. The Dow Jones Industrial Average turned slightly higher, up 0.3 per cent.
The Nasdaq Composite also extended its recent record streak, up 1.7 per cent, as tech stocks followed soon-to-be Dow component Salesforce higher.
Volatility in US stocks has been muted through much of August, with many investors and traders taking summer vacations in the US and Europe. The Cboe Volatility Index, a closely watched gauge of turbulence in US stocks, has in recent days been at its lowest since before the coronavirus pandemic capsized markets.
Investors have grown confident that the Federal Reserve and other central banks will continue to bolster the economy by holding short-term interest rates low and buying government bonds and other forms of debt. That is pushing yields on sovereign debt, considered among the safest assets to own, below expected inflation levels. It’s also prompted investors to look for higher returns in riskier assets, like equities.
Data on Wednesday showed orders for durable goods in the US surged 11.2 per cent in July, more than double the expected gain.
Stats like the surge in durable goods will likely feed investors who are confident the recovery is continuing, said Tobias Levkovich, the head U.S. equity strategist at Citigroup.
Earlier in the week, he bumped higher his dour target for the S&P 500 for the year, saying central bank support and investor appetite made it more likely stocks would remain elevated, even if there are questions about the health of the economy. He cautioned the data is still coming off lows, but said investors are paying closer attention to acceleration.
Investors are also watching the progress of Hurricane Laura as it gathers strength and churns toward Texas and Louisiana.
Brent crude, the international oil benchmark, was down a penny to $US46.28 a barrel, Stockpiles of fuel are high due to the pandemic’s impact on demand, potentially minimising the disruption on energy prices from the storms.
Shares of Salesforce jumped 26 per cent. The business-software provider posted record quarterly sales and raised its guidance after the closing bell on Tuesday, showcasing the sustained appetite for cloud-computing services during the pandemic. The company will be added to the Dow Jones Industrial Average at the start of trading Monday.
Overseas, the pan-continental Stoxx Europe 600 edged up 0.9 per cent. In Asia, major stock gauges ended the day on a mixed note.
Dow Jones Newswires
5.40am: Facebook complains about Apple update
Facebook says privacy changes that Apple has made to its newest operating system will cripple the social-media giant’s ability to serve targeted ads to iPhone users while they use outside apps.
The announcement sharpens the clash between the two tech giants, with Apple standing for user privacy while Facebook defends the free flow of data that has long underpinned digital marketing.
Facebook released a note to app developers, saying Apple’s changes will affect its Audience Network business. That business connects users’ Facebook identities with their off-platform activities, enabling the company to serve ads on outside apps — and to enrich its own data set with information collected elsewhere, allowing Facebook to refine its behavioural targeting.
The changes go into effect with Apple’s new operating system for iPhone, called iOS14, which was released in beta form to developers in June. Under Apple’s new rule, Facebook and other firms that facilitate online advertising will no longer be allowed to gather Apple’s identifier for advertisers, or IDFA, without user permission. This 32-character string of letters and numbers is the user’s principal pseudonym in the ‘anonymised’ files kept by the digital-ad and data-broker industries. Companies large and small use it to match up data sets about where users go, what they have bought and what apps they use.
Dow Jones
5.35am: A return to positive rates?
Strong governmental responses to the coronavirus pandemic could pave the way for a return to positive interest rates in the eurozone, a top European Central Bank official said.
“A forceful policy response by governments to the pandemic is indispensable for raising potential growth, thereby paving the way for positive interest rates in the future,” Isabel Schnabel, a member of the central bank’s executive board, said at a roundtable in Frankfurt.
The ECB has held its key rates at historic lows in recent years, setting its bank deposit rate as low as -0.5 per cent — meaning banks pay to store cash with the ECB.
The ultra-low rates are meant to encourage spending and investment to boost economic growth.
But banks complain that they hurt their profitability, while Germany in particular has criticised how the rates hit savings.
AFP
5.30am: Markets mark time
World stock markets marked time, with the coronavirus’ economic impact and fresh outbreaks in some countries weighing on investors’ minds, while hope sprung from hints it is easing elsewhere and that a vaccine could arrive soon.
Oil prices continued to test five-month highs with North American producers bracing for the arrival within hours of Hurricane Laura in the US Gulf Coast region.
Around three million barrels per day of refining capacity have been closed after US authorities said the hurricane could bring “potentially catastrophic storm surges, extreme winds and flash flooding.” Futures prices for US benchmark West Texas Intermediate traded in a tight range and dipped ahead of mid-session gains to break above $US43.60 — a rise of half a per cent — before slipping back slightly.
“Investors’ insatiable appetite for risk has continued so far this week, with major US indices hitting new record highs and crude oil prices rallying to their best levels since the pandemic,” said ThinkMarkets analyst Fawad Razaqzada.
Wall Street was almost unchanged two hours in, while London (up 0.1pc) and Paris (up 0.8pc) made the most meagre of gains, not least over concern at the lingering presence of the coronavirus, although Frankfurt added 1.0 per cent.
“Second wave fears are becoming more real in Europe as a number of countries, particularly tourist destinations such as Spain and France, are seeing a strong rise in COVID-19 cases,” said City Index analyst Fiona Cincotta.
“Governments … are showing reluctance to slap nationwide lockdowns into place just yet but investor concerns are growing.”
Attention is now turning towards a virtual meeting of central bankers in Jackson Hole, Wyoming, with the key event a Friday (AEST) speech by US Federal Reserve chief Jerome Powell.
Most markets had wobbled Tuesday as fading US consumer confidence undermined news that China and the United States would stick with a trade pact agreed earlier this year, although Wall Street booked a three-day string of record closes.
AFP
5.20am: US durable goods up 11pc
A spike in demand for transportation equipment sent US durable goods orders blowing past expectations with an 11.2 per cent gain in July, the Commerce Department said.
It was the third consecutive monthly gain in demand for big-ticket manufactured products, with orders up to $US230.7 billion in July following June’s upwardly revised 7.7 per cent climb.
That brought the amount closer to the level posted in February 2020 before the coronavirus pandemic hit, but it was all thanks to the strength of transportation equipment, which in July surged 35.6 per cent to $US74.7 billion.
AFP
ASX 200 falls on China update; BHP leads mining reversal
Iron ore, copper futures, AUD down after China's underwhelming economic update. RBA's 'step down' in hawkishness evident in September minutes, but deputy governor Andrew Hauser says inflation job's not done yet.
ASX 200 rises on banks; Arcadium top gainer
Rio Tinto's takeover approach lifts Arcadium Lithium appeal. West African Resources drops on Burkina Faso mining concerns. Qantas may avoid second strike after proxy backing.