The National Tyre & Wheel Ltd (ASX: NTD) share price is gaining traction today on the back of an FY20 trading update and related full-year guidance.
At the time of writing, National Tyre & Wheel shares have raced 26.79% higher so far today to 35.5 cents per share. This takes its current market capitalisation to around $36 million, so we’re very much at the smaller end of the ASX spectrum here.
About National Tyre & Wheel
As its name suggests, the company is in the business of tyres and wheels. It supplies the latest generation of tyres and wheels to consumers in Australia, New Zealand and, to a lesser extent, South Africa.
The company has a number of different brands under its banner to service the car, SUV, 4WD, light commercial and caravan segments. These brands include Exclusive Tyre Distributors, Cooper Tires, Mickey Thompson, and Dynamic Wheel Co.
Although National Tyre & Wheel’s history dates back to 1989, it is relatively new to the ASX scene after listing in December 2017.
Why the National Tyre & Wheel share price is gaining traction
This morning, the company released an FY20 trading update, providing details of recent trading conditions along with forecasts for the full-year.
According to the announcement, trading results in April and May have exceeded expectations and volatility has subsided to the extent that shorter predictions can now be made with reasonable certainty.
As a result, the company provided guidance for FY20 operating earnings before interest, tax, depreciation and amortisation (EBITDA) of between $8.9 million and $9.3 million. Additionally, the first quarter of FY21 is expected to be consistent with this trajectory.
Some of its subsidiaries have received JobKeeper support, while others remain above the eligibility threshold. JobKeeper payments received in the fourth quarter of FY20 will amount to $0.96 million, representing 25% of people costs in that period.
National Tyre & Wheel believes its experience in Australia and New Zealand over the past 2 months is generally consistent with the overall performance of the tyre and wheel industries. According to the company, these industries are proving to be resilient in response to a difficult economic environment.
As for Top Draw Tyres, National Tyre & Wheel’s 50%-owned South African subsidiary, trading remains limited by government-imposed restrictions. The company also warned of a potential impairment charge of up to $1.8 million relating to the value of intangible assets.
Importantly, National Tyre & Wheel stated it has no present need to increase non-trading debt or raise capital. As of 30 April, the company had cash on hand of $18.4 million, placing it in a net cash position of $6 million.
In addition, National Tyre & Wheel has reinstated its dividend policy after temporarily suspending it on 3 April. The board will now apply the policy based on trading results over the coming months.
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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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