Author: therawinformant

The Santos Ltd (ASX: STO) share price will be on watch today after the energy producer released an update on its guidance for FY 2020.

What did Santos announce?

This morning Santos upgraded its production guidance and reduced its cost guidance for the 12 months ended 31 December.

According to the release, Santos is now expecting its production to be in the range of 87 to 89 million barrels of oil equivalent (mmboe) in FY 2020.

This compares to its prior guidance of 83 to 88 mmboe and represents 15% to 18% production growth for the year and more than 50% growth since 2015.

Management advised that this is being driven by its strong operating performance across the base business.

In respect to its costs, management advised that Santos is on track to deliver the production cost reductions announced in March in response to the COVID pandemic. This will see its FY 2020 guidance lowered to $8.00-$8.50/boe.

In addition to this, management revealed that its capital expenditure is still expected to be approximately $900 million. This is consistent with the 38% reduction for the year that it announced in March.

Acquisition integration update.

Santos also provided an update on the integration of the ConocoPhillips acquisition which completed in May 2020.

Management advised that the integration is proceeding well, with guidance on acquisition synergies upgraded to $90 million to $105 million per annum.

Santos’ Managing Director and Chief Executive Officer, Kevin Gallagher, commented: “Our strategy has been to establish a disciplined low-cost operating model that delivers strong free cash flows through the oil price cycle. Our 2020 forecast free cash flow breakeven oil price is less than US$25 per barrel before hedging and around US$20 per barrel after hedging.”

“Our base business is strong with production levels expected to remain relatively steady for the next decade and providing significant free cash flow. This cash flow combined with a strong balance sheet and control over the timing of our major projects, means we are well positioned for disciplined growth,” he added.

Santos also announced another major step towards a final investment decision on the Barossa project. Management advised that this follows Darwin LNG approving tolling agreements to transport and process Barossa gas through DLNG.

Finally, Santos has also announced an ambitious roadmap to net-zero emissions by 2040 and new emissions targets designed to support Australia’s commitment to the Paris Agreement. This includes a 26% to 30% reduction in scope 1 and 2 emissions by 2030, and a commitment to actively work with customers to reduce their emissions.

“Our focus over the last three years on step change technologies such as carbon capture and storage has enabled a pathway that allows us to go further faster when it comes to emissions reduction,” Mr Gallagher concluded.

More reading

• 5 things to watch on the ASX 200 on Monday
• ASX 200 down 0.35%: Bega Cheese jumps, Flight Centre & Webjet tumble lower
• This expert thinks the oil price could surge to US$196 a barrel in 2021
• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro 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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Strong performing ASX tech shares came few and far between in November. The S&P/ASX All Technology Index (ASX: XTX) was up 4.59%. This compares to the 9.5% rise from the S&P/ASX 200 Index (ASX: XJO). Despite a weaker tech sector, here are the hidden gems that performed the best.  

3 ASX tech shares that outperformed last month

Betmakers Technology Group Ltd (ASX: BET) 

The Betmakers share price soared more than 60% last month to hit a record all-time high of 70 cents. The only market sensitive news to come out of this ASX tech share in November was the approval for its fixed odds pilot program by the New Jersey Racing Commission.

The United States sports betting sector continues to develop in favour of bookmakers with the recent legalisation of sports betting in Maryland, Louisiana and South Dakota. This brings the count of legalised states to more than 20. 

In the Betmakers Virtual Tech Forum on 22 October, the company identified the US racing industry as a key market where operators will need a racing solution to fit alongside their sports offerings. The company advised it has made a number of key hires in FY21 to ensure it is well positioned to capitalise on the unique deals and is able to continue delivering new opportunities to the market. 

Pointerra Ltd (ASX: 3DP) 

The Pointerra share price is eyeing previous highs after its shares rocketed more than 67% last month to 52 cents. Pointerra provides geospatial services, similar to those of Nearmap Ltd (ASX: NEA), but more focused on data, as opposed to high quality aerial imagery. 

The company provided an enterprise sales and annual contract value (ACV) update on 26 November. This update highlighted an 18% increase in ACV to US$5.82 million in the 40 days since ACV was last reported. 

Dubber Corp Ltd (ASX: DUB) 

The Dubber share price went from strength to strength in November following the completion of the company’s capital raising back in October and a series of positive announcements. 

On 21 October, Dubber announced the global launch of its Unified Recording on Microsoft Corporation‘s (NASDAQ: MSFT) Teams, supported by a new and tailored global channel partner and reseller program. This allows Teams customers to automate voice recording at scale from any device with no need for hardware. 

On 6 November, the ASX tech share announced that it had been chosen as the recording and data capture platform for IBM (NYSE: IBM) Cloud for Telecommunications. The revenue from this partnership will depend on the take-up of the service. 

The Dubber share price ran more than 40% in November and is now within 5% of its previous record all-time high set in June 2019.

More reading

• Pointerra (ASX:3DP) share price falls 6% despite positive update
• Dubber (ASX:DUB) share price shoots up 14%, nears 52-week high
• The Dubber (ASX:DUB) share price is up 60% in two months
• Why the Dubber Corp (ASX:DUB) share price is surging today
• Why are ASX tech shares all over the place today?

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. and Pointerra Limited and recommends the following options: short January 2021 $115 calls on Microsoft and long January 2021 $85 calls on Microsoft. The Motley Fool Australia has recommended Nearmap Ltd. and Pointerra Limited. 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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The S&P/ASX 200 Index (ASX: XJO) has just completed a record-breaking month after recording a stunning 10% monthly gain to end the period at 6,517.8 points.

Unfortunately, not all shares on the index were able to follow the market higher, with some even recording sizeable declines.

Here’s why these were the worst performing ASX 200 shares last month:

Saracen Mineral Holdings Limited (ASX: SAR)

The Saracen share price was the worst performer on the index last month with a 16.5% decline. Investors were selling gold miners in November after COVID-19 vaccine progress gave investor sentiment a huge boost and led to demand for safe haven assets collapsing. For the same reason, Silver Lake Resources Limited (ASX: SLR), Northern Star Resources Ltd (ASX: NST), and Ramelius Resources Limited (ASX: RMS) shares all fell by more than 12.5% last month.

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The Domino’s share price wasn’t far behind with a 12.6% decline in November. This was also triggered by the positive vaccine news. Analysts at Macquarie downgraded the pizza chain operator’s shares to an underperform rating and cut the price target on them to $72.10. Its analysts believe that consumer behaviour will return to normal in 2021 thanks to the vaccine. This could mean the end of Domino’s elevated sales.

Super Retail Group Ltd (ASX: SUL)

The Super Retail share price was out of form and dropped 11.7% lower during the month. This also appears to have been driven by a broker downgrade. Analysts at Morgans downgraded this retailer’s shares to a hold rating and reduced the price target on them to $11.78. The broker is expecting Super Retail to have a strong holiday period. However, it believes a redirection of spending post-vaccine will slow its growth in 2021.

NEXTDC Ltd (ASX: NXT)

The NEXTDC share price was a poor performer and tumbled 11.7% lower in November. This data centre operator appears to have been caught up in a tech selloff triggered by the vaccine news. Investors were rotating out of COVID-winners like NEXTDC and into value options. Despite this sizeable decline, the NEXTDC share price is still up a massive 72% in 2020.

More reading

• These were the best performing ASX 200 shares in November
• 5 things to watch on the ASX 200 on Tuesday
• Why the Magellan (ASX:MFG) share price dipped lower today
• ASX 200 drops on Monday
• What Australia’s recovery from the COVID recession means for the Santa Rally

Motley Fool contributor James Mickleboro 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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The S&P/ASX 200 Index (ASX: XJO) was on fire in November thanks to positive COVID-19 vaccine developments. The benchmark index rose an incredible 10% to end the period at 6,517.8 points.

While the majority of shares on the index climbed higher with the market, some recorded stronger gains than others.

Here’s why these were the best performing ASX 200 shares last month:

Unibail-Rodamco-Westfield CDI (ASX: URW)

The Unibail Rodamco Westfield share price was the best performer on the ASX 200 in November with a massive 73.1% gain. Investors were fighting to get hold of the shopping centre operator’s shares thanks to the aforementioned COVID-19 vaccine developments. The launch of a highly effective vaccine sooner than expected could give its struggling Westfield centres around the world a huge lift next year. Despite this incredible gain, the Unibail Rodamco Westfield share price is still down 55% since the start of the year.

Webjet Limited (ASX: WEB)

The Webjet share price wasn’t far behind with a 65.3% gain in November. This was also driven by the vaccine news. The prospect of an effective vaccine being released early next year could mean global travel markets recover far quicker than expected. In addition to this, the reopening of domestic borders also gave its shares a boost. For the same reasons, the Flight Centre Travel Group Ltd (ASX: FLT) share price jumped 52% last month.

Beach Energy Ltd (ASX: BPT)

The Beach share price was on form and stormed 49.2% higher last month. Investors were buying Beach and other energy producers after oil prices recovered strongly during the month. With the global economy tipped to recover quicker than anticipated from the pandemic, experts are expecting this to underpin a significant increase in demand for oil. For the same reason, the Oil Search Ltd (ASX: OSH) share price rose 41.6% over the month.

Virgin Money UK CDI (ASX: VUK)

The Virgin Money UK share price was a strong performer last month and jumped 40.9%. Investors were fighting to get hold of the UK-based bank’s shares after Pfizer released very positive data from its phase 3 COVID-19 vaccine trial. Given how bad the situation is in the UK, the possibility of a working vaccine being released by the end of the year has given investor sentiment a huge boost. This offset the release of a very disappointing full year result. For the 12 months ended 30 September, Virgin Money UK posted a 77% decline in full year underlying net profit to 124 million pounds. 

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Why the Magellan (ASX:MFG) share price dipped lower today
• ASX 200 drops on Monday
• What Australia’s recovery from the COVID recession means for the Santa Rally
• ASX 200 drops 0.5%: Treasury Wine sinks, Zip flat after AGM update, Bega Cheese rises

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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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In this article are three small cap ASX shares rated as buys.

Each of the below businesses have a market capitalisation under $750 million:

Audinate Group Ltd (ASX: AD8)

Audinate is a business that has a market capitalisation of $545 million according to the ASX.

It’s a business that provides the Dante platform, which distributes audio and video signals across computer networks. It boasts of being the leading supplier of digital audio and video networking for the professional AV industry.

In Audinate’s recent FY21 first quarter trading update, it said that it has seen a steady improvement in trading conditions since May. Customer and market segments have been impacted differently. There is “good momentum” in corporate conferencing and higher education, however there are still challenging conditions in live sound and large events because of COVID-19 impacts.

In the first quarter of FY21 it generated revenue of US$5.2 million. It also made AU$0.3 million of earnings before interest, tax, depreciation and amortisation (EBITDA).

The small cap ASX share is liked by fund manager Clime Capital Ltd (ASX: CAM), which said that this update was better than expected. It said that the recent sales resilience reflect the company’s diverse customer base and industry unit volumes are expected to rise significantly in the coming years, with the company likely to capture a lot of this demand because it has an adoption rate that’s eight times higher than the nearest competitor.

Sezzle Inc (ASX: SZL)

Sezzle is an ASX-listed, US-based buy now pay later (BNPL) business. According to the ASX, it has a market capitalisation of $1.2 billion.

The company operates in a similar way to other providers. It offers an interest-free instalment plan at online stores and select in-store locations. The purchase is split into four interest-free payments over six weeks, with no fees if the customer pays on time.

In its quarterly update for the three months to 30 September 2020, its underlying merchant sales (UMS) increased by 231.5% year on year to US$228.2 million, or 21.4% quarter on quarter. This translated to merchant fees increasing by 260.6% to US$13 million, or 22.5% quarter on quarter.

Active customers rose 178.1% year on year to almost 1.8 million, whilst active merchants grew 178.3% to 20,890.

The active consumer repeat usage rose by 748 basis points year on year to 89%, this represented a 41 basis points increase quarter on quarter.

The Motley Fool Hidden Gems service still rates Sezzle as a buy as part of a well-diversified portfolio. 

Edward Vesely commented that the growth numbers from the quarter were very impressive. However, the company continues to trade at a high multiple compared to last year’s revenue. He said that whilst that multiple is steep, “if strong growth rates can be maintained, then this multiple will fall drastically. For comparison’s sake, when we recommended Sezzle just over a year ago, the company was valued at a price/revenue multiple of around 50 times. That is, strong growth has seen that multiple reduce, despite a more than tripling of the share price.”

Healthia Ltd (ASX: HLA)

Healthia is an small cap ASX share that is an integrated group of allied health businesses which includes My FootDr (a podiatry business), Allsports Physiotherapy, Extend Rehabilitation, iOrthotics (a 3D printing orthotic devices business) and DBS Medical Supplies (a podiatry equipment business).

In FY20 the company increased its underlying revenue by 40%, its underlying EBITDA grew 47.6% and its underlying net profit grew by 22.7%. Underlying earnings per share (EPS) went up by 19.3%.

The company started paying dividends recently, with a final dividend of 2 cents per share. That represents a grossed-up dividend yield of 2.2%.

It continues to make acquisitions to bolster its network and increase scale. It recently announced the acquisition of an optometry business.

Healthia is currently rated as a buy by the Motley Fool Hidden Gem service.

More reading

• Healthia (ASX:HLA) share price on watch after acquisitions update
• 2 exciting small cap ASX shares to buy
• Fundie names 5 ASX shares with good growth prospects
• Afterpay (ASX:APT) share price under pressure by US BNPL giant
• Is the Sezzle (ASX:SZL) share price a buy?

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia has recommended AUDINATEGL FPO, HEALTHIA FPO, and Sezzle Inc. 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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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week on a very disappointing note. The benchmark index sank 1.25% to 6,517.8 points.

Will the market be able to bounce back from this on Tuesday? Here are five things to watch:

ASX 200 expected to edge lower.

The Australian share market looks set to start the month in a subdued manner. According to the latest SPI futures, the ASX 200 is expected to open the day 5 points lower this morning. This follows a poor start to the week on Wall Street, which in late trade sees the Dow Jones down 1.2%, the S&P 500 down 0.7%, and the Nasdaq down 0.2%.

Collins Foods half year result.

The Collins Foods Ltd (ASX: CKF) share price will be one to watch this morning when it hands in its half year results. The KFC and Taco Bell operator has been a positive performer during the pandemic and delivered strong sales and earnings growth. Expectations are high for FY 2021, with more of the same being forecast in the first half. Investors will also be keen to see how its European businesses are faring given the rising COVID cases on the continent.

Oil prices tumble lower.

Energy producers such as Oil Search Ltd (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) could be under pressure today after oil prices tumbled lower. According to Bloomberg, the WTI crude oil price is down 1.6% to US$44.80 a barrel and the Brent crude oil price has fallen 1.5% to US$47.47 a barrel. Concerns over OPEC’s output plans is weighing on prices.

Moderna COVID vaccine update.

Moderna has revealed new data from its trials which shows that its COVID-19 vaccine is more than 94% effective. In light of this, the company plans to ask the US FDA for emergency clearance. This announcement means that some people in America could get the first doses of its two-dose vaccine within a few weeks.

Gold price continues to fall.

Gold miners including Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) could have a tough day after the gold price dropped lower again. According to CNBC, the spot gold price is down 0.25% to US$1,784.10 an ounce. This may be due to Moderna’s vaccine update.

More reading

• Why the Magellan (ASX:MFG) share price dipped lower today
• ASX 200 drops on Monday
• What Australia’s recovery from the COVID recession means for the Santa Rally
• ASX 200 drops 0.5%: Treasury Wine sinks, Zip flat after AGM update, Bega Cheese rises
• ASX 200 Weekly Wrap: ASX 200 on track for a top month

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The Macquarie Telecom Group Ltd (ASX: MAQ) share price was a particularly poor performer on Monday.

In the last minutes of trade, the data centre and telecom company’s shares tumbled 6% to $49.02.

Shareholders will no doubt be hoping for a better day of trade on Tuesday, especially after the release of its investor day update this evening.

What was in the update?

As well as providing a summary on its strong performance in FY 2020, management gave investors an idea on its expectations for the year ahead.

In respect to FY 2020, Macquarie Telecom delivered an 8% increase in revenue to $266.2 million.

Things were even better for its earnings thanks to margin expansion. Macquarie Telecom reported a 25% lift in earnings before interest, tax, depreciation, and amortisation (EBITDA) to $65.2 million. 

This has become the norm for Macquarie Telecom in recent years due to a positive shift in its earnings mix. Over the last three years its revenue has grown by a compound annual growth rate (CAGR) of 6.8%, whereas EBITDA has grown by a CAGR of 16.8%.

Pleasingly, management is expecting its EBITDA to grow again in FY 2021.

Today’s update reveals that it is expecting first half EBITDA in the range of $36 million to $37 million. This will be a 13.9% to 17.1% increase on the $31.6 million it achieved in the prior corresponding period.

And while management is expecting its second half EBITDA to be flat compared to the first half, due to its investment in sales and operational resources to support continued growth, this should still mean solid year on year growth.

After which, the company expects its FY 2022 results to be boosted by the construction of capacity which is under a new contract. This will occur through calendar year 2021, ready for billing to commence in the third quarter of FY 2022.

Looking further ahead, management is very positive on the future and expects the company to benefit from increasing demand for data centre capacity and the adoption of cloud cyber security.

And with the Macquarie Telecom share price up 104% year to date, it appears as though many investors agree with this view.

More reading

• The 13 ASX shares that could have doubled your money in 2020
• These ASX shares have more than doubled in value in 2020
• Latest ASX stocks to be hit by a broker downgrade
• Macquarie Telecom (ASX:MAQ) share price surges on contract win

Motley Fool contributor James Mickleboro 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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The Healthia Ltd (ASX: HLA) share price will be on watch on Tuesday following the release of an update after the market close.

What did Healthia announce?

This afternoon the healthcare company announced the completion of a couple of new acquisitions.

According to the release, the company has settled the $43 million acquisition of The Optical Company which was announced to the market on 30 October.

As part of the acquisition, the vendors have been issued with 9.4 million shares at an issue price of 95 cents. These will be held in voluntary escrow.

In addition to this, The Optical Company’s founder and CEO, Colin Kangisser, has been appointed as the CEO of Healthia’s newly formed Eyes & Ears division and as a director of Healthia.

Mr Kangisser founded The Optical Company in 2006 and is a registered optometrist with over 30 years’ experience in the industry.

This acquisition is expected to contribute underlying revenue of $35.8 million, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $5.7 million, and underlying profit after tax of $2.8 million.

It is also expected to deliver ~15% underlying earnings per share accretion (excluding transaction and integration costs).

North Queensland Physiotherapy Centre acquisition.

Healthia has also revealed that it has completed the acquisition of North Queensland Physiotherapy Centre, which was announced on 29 October. North Queensland Physiotherapy Centre comprises three physiotherapy clinics in North Queensland.

The company agreed a fee of $1.34 million. This comprises an upfront cash consideration of $0.904 million and the issue of $0.4 million Healthia shares to the vendors. A contingent consideration of $0.35 million will become payable in cash within 36 months after completion, subject to businesses achieving EBITDA of greater than $0.38 million.

Management expects the clinics to generate revenue of $1.97 million and EBITDA of $0.275 million.

Investors certainly have responded positively to these acquisitions. Since their announcement, the Healthia share price is up almost 28% and trading within touching distance of its record high.

More reading

• Freedom Foods (ASX:FNP) reveals $174.5m loss and $280m capital raising plan
• Want dividends from the US? Try this ASX ETF
• 2 quality mid cap ASX shares to buy in December
• Why the Magellan (ASX:MFG) share price dipped lower today
• Meet the latest ASX stock to come under the takeover spotlight

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended HEALTHIA FPO. 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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After almost six months suspended, the Freedom Foods Group Ltd (ASX: FNP) share price is nearing a return to trade.

Ahead of its potential return, this afternoon the embattled food company released its long-awaited full year results for FY 2020.

What happened in FY 2020?

For the 12 months ended 30 June, Freedom Foods reported total revenue of $580.2 million. This was a 26% year on year increase on its restated FY 2019 revenue of $461.8 million.

This was driven by its Dairy & Nutritionals and Plant-based Beverages businesses. Dairy & Nutritionals grew revenue by 37% to $362.9 million. Management advised that this was the result of growing demand for lactoferrin. Whereas the Plant-based Beverages business reported a 30% lift in revenue to $132.3 million thanks to strong MILKLAB growth.

In respect to earnings, the company reported an earnings before interest, tax, depreciation and amortisation (EBITDA) loss of $86.5 million. This compares to a restated EBITDA loss of $88 million a year earlier. Prior to restating its accounts, Freedom Foods had recorded positive EBITDA of $55.2 million in FY 2019.

On the bottom line, Freedom Foods posted a loss after tax of $174.5 million. This compares to a restated loss after tax of $145.8 million a year earlier, which was previously reported as a profit of $21.9 million.

Restatements.

The company revealed that its FY 2019 accounts were restated to reflect past accounting matters and asset impairments.

Net asset write-downs and restatements of approximately $590 million were made for FY 2020 and prior years.

The company explained: “The FY20 audit by Deloitte and a forensic accounting investigation by PwC identified a range of accounting matters going back a number of years. Most significantly, the reviews determined that most of the costs capitalised during the commissioning phase of the Group’s capital investment program should be more appropriately treated as expenses.”

“These accounting treatments contributed to decisions on new products and expansions that were based on unrealistic assessments of market opportunities and margin assumptions that were not realised. As a result, too many Group products were sold at prices that did not fully recover their costs. These matters have resulted in a material restatement of the Group’s FY19, FY18 and prior period accounts and material write-downs and adjustments,” it added.

Management commentary.

Freedom Foods’ Interim Chief Executive Officer, Michael Perich, was very disappointed with this results release.

He commented: “This is a deeply disappointing set of results for Freedom Food Group, its people and its shareholders. The results reflect the significant costs of past accounting and operational matters – matters we have identified with the assistance of independent experts and are taking steps to remedy.”

“Operationally, we are reviewing the economics of every product line, every site, every sales channel and every market segment to ensure we are focused on those brands with the greatest potential to deliver profitable sales. We will be removing products that are not delivering value and investing in the ones that are.”

“Freedom Foods needs to become a simpler business – and that includes identifying parts of our business that may perform better under different ownership,” he added.

Recapitalisation plan.

Freedom Foods has been reviewing options to recapitalise the business. This includes through debt, equity, or a combination of both.

The board undertook an extensive process to select the right capital solution, given the uniqueness of its current situation.

The proposed approach it has settled on is an ASX-listed convertible note. It advised that this will protect the incoming capital as secured debt, while providing equity-linked optionality and flexibility.

It is anticipated that the capital raising will total up to $280 million. The company intends to provide existing shareholders with an opportunity to participate.

A further announcement on the recapitalisation will be made before the end of the calendar year.

More reading

• Freedom Foods (ASX:FNP) prepares for return to trading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Freedom Foods Group Limited. 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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The S&P/ASX 200 Index (ASX: XJO), and ASX shares by extension, have always enjoyed a reputation for hefty dividend payments. This could be due to a number of factors.

Perhaps our tax system’s treatment of company taxes under the franking credit system. Or perhaps just the fact that most of the ASX 200’s largest companies, like the ASX banks and miners, have a history of prioritising shareholder income.

Either way, Aussie investors love their dividends, and our share market in many ways reflects this. The same can’t be said of other countries though, especially the United States.

US shares have never been known for their dividends. Several of the US’s largest companies, such as Alphabet Inc, Amazon.com Inc, Facebook Inc and (most famously) Warren Buffett’s Berkshire Hathaway Inc don’t (and never have) paid out dividends (with the exception of a one-off from Berkshire in 1967). An equivalent situation on the ASX would be almost unthinkable.

As a case in point, let’s take an index exchange-traded fund (ETF) covering the ASX shares – the Vanguard Australian Shares Index ETF (ASX: VAS). It currently offers a trailing dividend yield of 3.58% (plus franking) on current data. Meanwhile, an index ETF covering US shares, such as the iShares S&P 500 ETF (ASX: IVV) offers a trailing yield of just 1.64%.

So, are income investors who would like to add some US shares to a dividend portfolio fresh out of luck?

Not necessarily. There’s an ETF out there that deals with this very issue. It’s the BetaShares S&P 500 Yield Maximiser Fund (ASX: UMAX).

UMAX out your payouts

This fund isn’t you’re typical market-tracking index fund. It does follow the S&P 500 Index (INDEXSP: .INX) (tracking most of the largest 500 companies in the US). But it uses an options strategy to increase the income the fund generates. To illustrate, the fund currently offers a trailing yield of 7.2%. How does this work?

According to BetaShares, here’s how:

In addition to the share portfolio, the fund will also sell (or “write”) exchange-traded index call options on up to 100% of the fund’s exposure to the index. The call options will generally be written with terms of less than three months…

By writing index call options, the fund will receive option premiums which are expected to provide an additional source of income for the fund and a partial hedge against a decline in the value of the share portfolio. The fund’s strategy is expected to outperform a strategy of holding the share portfolio alone (i.e. without writing index call options), in falling, flat and gradually rising markets.

If you’re still confused by this strategy, here is some more information about how options work.

Is UMAX a buy for dividend income?

The BetaShares S&P 500 Yield Maximiser Fund is currently rated as a ‘buy’ for the Motley Fool’s Dividend Investor service, as well as our Everlasting Income service.

Our Fool analysts love the increased income prospects this fund offers, it’s quarterly distribution schedule, exposure to the US markets, and the international diversification it brings to the table.

More reading

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• I plan to invest heavily in ASX shares next week

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares) and Facebook. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Berkshire Hathaway (B shares), and Facebook and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), short January 2022 $1940 calls on Amazon, long January 2022 $1920 calls on Amazon, and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Berkshire Hathaway (B shares), and Facebook. 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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