Author: therawinformant

The Premier Investments Limited (ASX: PMV) share price is zooming higher on Thursday after providing a second half trading update for its Retail business.

At the time of writing the retail conglomerate’s shares are up over 10% to $18.65. At one stage they were up as much as 12% to $19.02.

What did Premier Investments announce?

According to the release, for the 26 weeks ending 25 July 2020, the company’s global sales were $484.2 million. This was down $106.5 million or 18% on the second half of FY 2019.

Things would have been a lot worse for the company had it not had such a strong online business. The company’s online sales hit $123.3 million during the second half, up $50.8 million or 70% on the prior corresponding period.

This means they contributed 25.5% of its total second half sales, up from 12.3% for the same period last year. For the full year, online sales were $220.4 million, up 48.8% on FY 2019 and contributing 18.1% of its total FY 2020 sales.

One big positive with this strong online sales growth is that its ecommerce sales deliver a significantly higher earnings before interest and tax (EBIT) margin than its retail stores.

In light of this, it now expects its second half Retail EBIT to be between $58.7 million and $59.7 million, up between $5.2 million and $6.2 million or 9.7% and 11.7% on the prior corresponding period.

This means that its full year Retail EBIT is expected to be between $184.8 million and $185.8 million in FY 2020, up 10.5% to 11% on FY 2019’s result.

It is worth noting that the figures mentioned above are only for its Retail business and do not include any results from its investment division. Nor have they been audited or include any potential asset value impacts resulting from COVID-19.

Premier Investments’ full year results are expected to be released to the market in late September.

More reading

• Why AMP, Premier Investments, QBE, & Treasury Wine shares are storming higher
• How you can take advantage of the surging Australian dollar
• You probably shop at these 7 ASX retailers. Should you buy shares in them too?
• Leading brokers pick the latest ASX 200 stocks to buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments 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 Northern Star Resources Ltd (ASX: NST) share price has slumped 1.6% lower in early trade despite reporting an increase in planned production.

Why is the Northern Star share price on the move?

The Aussie gold miner reported FY21 expected production guidance, excluding KCGM, of 720,000 to 820,000 ounces.

KCHM is the joint venture between Northern Star and Saracen Mineral Holdings Limitedd (ASX: SAR) in the Kalgoorlie Super Pit gold mine.

Northern Star is forecasting production to climb to ~900,000 in FY22 and ~1,000,000 in FY23.

On top of that, the miner’s all-in sustaining cost (AISC) is forecast to fall 10% lower over that period.

Despite the seemingly good news, the Northern Star share price has fallen lower in early trade. That comes after gold prices endured their worst day in seven years yesterday which sent ASX gold shares tumbling lower.

Northern Star reported an increase in Group Resources by 3,200,000 ounces to 22,300,000 ounces. Resources per share have grown by 120% over the past 5 years excluding KCGM.

It’s a similar story in relation to Group Reserves which have jumped 12% to 6,000,000 ounces as at 30 June. Reserves per share are up 180% over the last 5 years despite production of 3,600,000 ounces.

FY21 guidance

The Aussie gold miner also provided FY21 guidance in today’s update.

Northern Star expects Australian production guidance excluding KCGM to total 540,000 to 600,000 ounces in FY21. The miner is forecasting an AISC of A$1,425 to $1,525 per ounce this financial year.

FY21 guidance for its Pogo operations is expected to total 180,00 to 220,000 ounces at an AISC of US$1,200 to US$1,400 per ounce.

The Aussie gold miner continues to grow its exploration and production, budgeting A$95 million for exploration in FY21.

However, investors have continued to sell out this morning, sending the Northern Star share price down 1.6%.

The S&P/ASX 200 Index (ASX: XJO) has opened the day up 0.25% at just over 6,130 points in early trade.

More reading

• Qantas share price is facing this new challenge in FY21
• Breville share price on watch as dividends climb 10.8% higher
• Flight Centre share price on watch after achieving cash flow target
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 drifts 0.1% lower, CBA reports solid FY20 result

Motley Fool contributor Ken Hall 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 Arena REIT No 1 (ASX: ARF) share price is trading 1.79% higher in early trade (at time of writing) following the release of its FY20 results. Arena is a real estate investment trust (REIT) that invests in sectors such as childcare, healthcare, education and government tenanted facilities leased on a long term basis.

FY20 highlights

Arena REIT announced a net operating profit for FY20 of $43.8 million. This represents an increase of 16% on the prior corresponding period (pcp).

The REIT’s statutory net profit increased 29% to $76.6 million from $59.3 million compared to the pcp.

Earnings per share (EPS) of 14 cents is up 4% on the pcp. This came below consensus estimates of 15.8 cents per share.

The group was able to deliver a 4% distribution per security of 14 cents in FY20.

Total assets increased 23% in FY20 to $1,012.6 million on FY19 as a result of acquisitions, development capital expenditure and the positive revaluation of the portfolio. The revaluation of property was the primary contributor to the 6% increase in net asset value (NAV) per security to $2.22 at 30 June 2020.

Pleasingly, its gearing ratio has decreased from 22.1% in FY19 to 14.8% by FY20.

Commenting on the result, Arena’s managing director Mr Rob de Vos said, “Despite ongoing uncertainty, we remain confident in Arena’s strategy, the strength of our portfolio and the important contribution the services we accommodate will make in aiding economic recovery and improving future community outcomes.”

COVID-19 impact

Despite 100% occupancy being maintained, the group has experienced some impact from the coronavirus pandemic. It has provided some rent relief to some tenant partners amounting to 4% of contracted rent for FY20.

The breakdown of the impact on Arena during the pandemic for the period 1 July 2019 to 30 June 2020 is as follows:

• 96% of contracted rent receipted
• 3.5% of contracted rent deferred, of which 71% is scheduled to be received in FY21
• 0.5% of contracted rent abated.

Outlook

Arena has provided FY21 distribution per security guidance of between 14.4 and 14.6 cents per security reflecting growth of 3–4% over FY20.

Mr de Vos said:

Arena remains well positioned to navigate the ongoing and emerging challenges arising from COVID-19 and to consider new opportunities that are consistent with strategy and Arena’s investment objective of delivering an attractive and predictable distribution to investors with earnings growth prospects over the medium to long term.

The Arena share price is currently trading at $2.28 per share and has fallen more than 21% in the past year, largely due to the impacts of the coronavirus pandemic.

More reading

• Northern Star share price falls 1.6% on trading update
• Stock split watch: Could Amazon be next?
• Treasury Wine Estates share price jumps higher on FY 2020 results
• Evolution Mining shares on watch as underlying profit jumps 86%
• Qantas share price is facing this new challenge in FY21

Motley Fool contributor Matthew Donald 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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In morning trade the Treasury Wine Estates Ltd (ASX: TWE) share price is charging higher following the release of its full year results.

At the time of writing the wine company’s shares are up 10% to $12.55.

How did Treasury Wine Estates perform in FY 2020?

For the 12 months ended 30 June 2020, Treasury Wine Estates’ performance was impacted by challenging conditions in the US wine market and the COVID-19 pandemic. As a result, the company reported net sales revenue (NSR) of $2,649.5 million in FY 2020, down 6% on the prior corresponding period.

This comprises NSR of $1,069.4 million in the Americas, $617.1 million in Asia, $370.6 million in EMEA, and $592.4 million in the ANZ region. While all regions posted NSR declines, the Americas and Asia segments were the worst performers. They reported declines of 5.7% and 14.5%, respectively, year on year.

Unfortunately, due to a 4-percentage point decline in its earnings before interest, tax, SGARA and material items (EBITS) margin to 20.1%, Treasury Wine Estates’ earnings fell harder. It posted a 22% decline in EBITS to $533.5 million. Management blamed the margin decline on an unfavourable volume and portfolio mix during the second half. This was driven by lower luxury sales due to the closure of key channels for higher-margin luxury wine.

On the bottom line, the company’s net profit after tax was down 25% to $315.8 million and its earnings per share fell 26% to 43.9 cents.

This led to the board declaring a fully franked final dividend of 8 cents per share, down 60% from 20 cents per share in the prior corresponding period. This brings its full year dividend to 28 cents per share, which represents a payout ratio of 64%. This is consistent with its long-term dividend policy.

FY 2021 outlook.

In light of the high level of uncertainty across key markets, Treasury Wine Estates won’t be providing any guidance for FY 2021.

However, it notes positive signs of a recovery in China, with depletions up 13% in the fourth quarter, including growth of approximately 40% in June.

Another positive is that the company is currently implementing a number of key restructuring initiatives, primarily in the Americas. These include key changes to its operating model and organisation structure, which are expected to lead to annualised cost savings of at least $35 million in FY 2021 and beyond.

It is also commencing with a restructure of its global supply chain, which is focused on driving optimisation and efficiency across all areas of production. This initiative is expected to deliver annualised cost of goods sold benefits of at least $50 million by FY 2023.

CEO Tim Ford commented: “While we have recently seen positive signs of recovery across a number of our key markets and channels, we are cautious on the near-term outlook given the uncertainty that remains around the pace of that recovery.”

“We remain optimistic around our ability to return to sustainable profit and margin growth over the medium to long-term. Supporting this optimism is our comprehensive strategic agenda, which is focused on building upon what is already a very strong business and positioning it for the next phase of TWE’s growth journey and the achievement of our ambition to be the world’s most admired premium wine company,” he concluded.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Why the Treasury Wine share price is sinking today
• Earnings season: What to expect from Treasury Wine Estates
• 2 ASX shares I would buy for growth and income today
• Is the Treasury Wine share price a buy?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates 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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Aussie gold miner Evolution Mining Ltd‘s (ASX: EVN) share price could be on the move today after a strong full-year result.

What did Evolution Mining announce?

It was a bumper FY20 result for the Aussie gold miner headlined by a record underlying net profit after tax (NPAT) result of $405.4 million.

Statutory NPAT jumped 38% to $301.6 million while earnings before interest, tax, depreciation and amortisation (EBITDA) surged 41% to $1,029.4 million.

Evolution Mining’s EBITDA margin jumped 10% higher from FY19 while group cash flow rocketed 86% to $541.8 million.

Those strong earnings numbers were underpinned by an increase in revenues and royalties. FY20 gold production totalled 746,463 ounces, up from 753,001 ounces in FY19.

The group’s all-in sustaining cost (AISC) came in at A$1,043 (US$700) per ounce – among the lowest gold producers in the world.

Soaring commodities prices and increased volumes were also evident in the company’s bottom line.

Evolution Mining delivered strong margins from many of its major producing mines. That saw the gold miner report record new mine cash flow up 48% to $736 million for the year.

Margins were also strong on a per ounce basis, with group cash flow climbing 88% compared to a 29% increase in gold prices.

What about the company’s dividend?

The Evolution Mining share price is worth watching today after also reporting a 50% jump in its final dividend. The Aussie gold miner will pay a final distribution of 9.0 cents per share, fully franked.

Earnings per share rocketed 84% higher to 23.8 cents per share. Evolution Mining shares closed at $5.54 on Wednesday afternoon.

That implies a price to earnings (P/E) ratio of 23.3 and a dividend yield of 1.6% per annum.

FY21 guidance

Many ASX companies have been unable or unwilling to provide FY21 guidance in the current market.

Group production is anticipated to be 670,000 to 730,000 in FY21 with an AISC of 1,240 to 1,300 per ounce.

However, Evolution has forecast a declining cost profile over the next 3 years. The gold miner sees AISC falling to $1,125 to $1,185 per ounce by FY23.

On the production side, Evolution is forecasting a steady increase to 790,000 to 850,000 ounces by FY23.

This is all part of the miner’s strategy to have a portfolio of 6 to 8 assets “generating superior returns with an average mine life of at least 10 years”.

One of those is the Red Lake Mineral Resource in Ontario, Canada. Evolution Mining today said it estimated 48.08 million tonnes, grading at 7.10 grams per tonne from the site.

That would provide an estimated 11.0 million ounces of gold which is significantly higher than what was estimated and used as justification for the acquisition.

That’s another reason why I’d be watching the Evolution Mining share price in early trade today.

Foolish takeaway

Evolution Mining shares could be on the move in early trade. Today’s record result, targeted guidance and Red Lake update is sure to pique investors’ interest.

More reading

• ASX gold miners on watch after gold price crashes lower
• 5 things to watch on the ASX 200 on Tuesday
• Gold price tops US$2,000: What’s driving it higher and how can you benefit?
• ASX 200 Weekly Wrap: Surging commodity prices snap ASX 200’s losing streak
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Ken Hall 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 Qantas Airways Limited (ASX: QAN) share price recovery just got a little trickier even as it takes the dubious honour of being a rare capital raising loser.

It appears that Regional Express Holdings Ltd’s (ASX: REX) ambition to be a thorn in the side of Qantas took a big step forward.

The Australian Financial Review reported that the tiny regional shuttle is buying around 10 Boeing 737s from Virgin Australia Holdings Limited (ASX: VAH).

I’ll explain why this is something Qantas shareholders will want to keep a close eye on later.

Placement under water

While around 75% of S&P/ASX 200 Index (Index:^AXJO) companies that raised emergency funds during the COVID-19 crisis are trading well ahead of their placement price, the same can’t be said for Qantas.

Some examples in the 75% group include the Flight Centre Travel Group Ltd (ASX: FLT) share price and National Australia Bank Ltd. (ASX: NAB) share price.

Near monopolistic power eroded

But the cap raise is water under the bridge. The challenge that investors weren’t counting on facing as we flew into the COVID-19 pandemic was increasing competition.

In fact, Qantas supporters rejoiced when archrival Virgin became an early casualty of coronavirus and plunged into administration.

This should leave the Flying Kangaroo with near monopolistic power, even if the wounded Virgin were to be revived. As it turns out, Virgin is rising from the ashes, albeit as a shadow of its former self.

One competitor becomes two

But Qantas now has to fend off a new challenger in Rex, which is going after some of Qantas’ most profitable domestic routes.

Rex only used to fly to regional towns in small propeller aircraft. The COVID-19 crisis presented it with an opportunity to expand its business as the heavily restructured Virgin looked to sell its passenger jets.

The new fleet will allow Rex to offer flights connecting Australia’s major cities, including the highly profitable Melbourne-Sydney connection.

I suspect Rex may prove to be a formidable competitor to Qantas too given Rex’s track record in running a tight ship through good cost control.

Capital raising on the cards?

The other key question is whether Rex may also contemplate plying short-haul international routes that the Boeing 737s are well suited for.

There’s no word on how Rex plans to fund the aircraft purchase, although it’s reported that the small cap is looking at striking an aircraft leasing agreement. A cap raise is certainly not out of the question either.

More reading

• Northern Star share price falls 1.6% on trading update
• Breville share price on watch as dividends climb 10.8% higher
• Flight Centre share price on watch after achieving cash flow target
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 drifts 0.1% lower, CBA reports solid FY20 result

Motley Fool contributor Brendon Lau owns shares of National Australia Bank Limited. Connect with me on Twitter @brenlau.

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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The Class Ltd (ASX: CL1) share price could be on the move following announcement of the company’s FY20 results. The Class share price has climbed 9.6% so far this month. Class creates software to assist customers automate and simplify complex administration in the financial services and related professional services sectors. Customers include accountants, self-manage super fund (SMSF) administrators, investment advisors, financial planners and lawyers.

FY20 highlights

Class’ operating revenue and other income was 15% higher to $44.1 million in FY20, up from $38.3 million in the prior corresponding period. The 15% increase exceeded Class’ guidance of a 14% increase. However, the FY19 result was not restated for the impact of the new accounting leasing standard AASB16.

In addition, statutory net profit was down 24% to $6.8 million in FY20 from $9 million in FY19.

Earnings per share (EPS) was 5.8 cents in FY20 down from 7.7 cents in the prior corresponding period. However, this exceeded analyst expectations of 5.5 cents per share.

A dividend of 2.5 cents was declared bringing the annual dividend to 5 cents per share. This was inline with FY19 and is payable on 18 September 2020.

Annualised recurring revenue (ARR) was up 22% to $46.8 million.

Class was also able to significantly grow its total customer numbers to 2,866 in FY20 from 1,545 in FY19.

Operating cash flow of $17.4 million was up from $12.9 million in FY19.

Class to acquire Smartcorp

Class has announced the execution of an agreement to buy 100% of shares in Smartcorp for $4.2 million. The transaction comprises an upfront cash payment of $2.73 million on completion plus $1.47 million in Class shares escrowed for 18 months. It is expected the transaction will be completed in August and earnings accretive in FY21.

Smartcorp is Australia’s first online company ordering and Australian Securities Investment Commission (ASIC) compliance system.

The acquisition will help grow Class’ footprint in the document and corporate compliance market.

Class CEO comments

Class CEO, Andrew Russell, was pleased with the acquisition commenting:

“Acquiring Smartcorp accelerates the role Class will play in the documentation and corporate compliance space.”

“…we will continue to build our capabilities and compelling value proposition to ensure we help all our customers manage their clients’ businesses more effectively through a comprehensive suit of services. This acquisition will also offer Smartcorp clients a broader range of products and services” he added.

What’s next for the Class share price?

Class’ revenue is expected to lift 20% higher in FY21 to $53 million compared to FY20. Underlying earnings before interest, taxation, depreciation and amortisation (EBITDA) margin target is expected to be 40% and above.

Additionally, Class has made good progress with its technology development and will launch Class Trust ahead of schedule in October 2020.

The Class share price is currently $1.48 as of yesterday’s market close and has increased 14.23% in the past year. The Class share price is down 27.8% in year-to-date trading.

More reading

• Openpay share price on watch after July update
• Breville share price on watch as dividends climb 10.8% higher
• Flight Centre share price on watch after achieving cash flow target
• Telstra hits guidance and declares 16 cents per share FY 2020 dividend
• Earnings season: 3 ASX shares you may have missed in August

Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Class 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 Openpay Group Ltd (ASX: OPY) share price will be one to watch this morning after the buy now pay later provider released a trading update.

What did Openpay announce?

This morning the Afterpay Ltd (ASX: APT) challenger revealed that its growth has continued during the early stages of FY 2021.

According to the release, in July Openpay reported a 235% increase in active plans compared with the prior corresponding period to 906,000. This was driven largely by a 145% year on year increase in active customers to 340,000.

On a month to month basis, which the company didn’t provide but I believe is a more important way to look at Openpay’s growth, active plans grew 10% and active customers rose 6.6%. While this is still very positive, it does appear to indicate that its rapid growth could soon start to plateau.

Total transaction value (TTV) for July was $24 million. This was a 114% increase on the prior corresponding period, but a 6.7% on its TTV in June. From this, the company recorded revenue of $2.1 million.

What were the drivers of its growth?

Management advised that the main growth drivers for July’s result were the accelerated growth in e-commerce in Australia and the continued strong increase in UK trading volumes.

It notes that trading volumes in the Automotive and Healthcare verticals (where businesses are mostly in-store) have increased. The Australian online channel contributed 27% of TTV ($4.7 million) in July, compared to in-store TTV at 73% ($12.5 million).

Bad debts improve.

While I felt its growth was underwhelming in July, I was pleased to see good progress with its bad debts.

Openpay reported net bad debts as a percentage of TTV of 1.54%. This compares to 2.89% in the fourth quarter of FY 2020 and 4.7% in the third quarter.

Management advised that this outcome follows improvements it made to its automated risk management (ARM) system in March, which continue to show a material positive impact.

Openpay will release its full year results on 31 August 2020, together with an update on its growth strategy for FY 2021.

More reading

• Is the Afterpay share price a buy?
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• Openpay share price up 16% on partnership with MSL Solutions
• 3 quality ASX tech shares to buy in August
• Afterpay and Immuron were among the most traded shares on the ASX last week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T 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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The Breville Group Ltd (ASX: BRG) share price is one to watch this morning after reporting a 10.8% increase in total dividends.

The Aussie home appliance manufacturer reported its earnings for the full year ended 30 June 2020 (FY20).

That result was headlined by a 25.3% increase in revenue to $952.2 million while gross profit jumped 18.2% higher to $320.6 million.

What did Breville announce?

That revenue growth was underpinned by strong performance across Breville’s various geographic segments and a strong US dollar.

Europe was the biggest growth segment in percentage terms, with segment revenues climbing 54.8% to $143.3 million. Rest of World (ROW), Australia and New Zealand (ANZ) and North America climbed 25.6%, 18.3% and 11.3%, respectively.

Earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 11.0% to $126.5 million, however, net profit after tax edged 1.8% lower to $66.2 million.

There was strong EBIT growth in both Breville’s Global Product and Distribution segments, climbing 14.5% and 23.8%, respectively.

The Breville share price will be worth watching today as the company reported a total dividend of 41.0 cents per share, franked to 60.0%.

Based on yesterday’s closing price of $27.29, that represents a 1.50% dividend yield for the ASX 200 share.

Breville’s net assets stayed largely stable at $297.9 million, down from $300.5 million in FY19.

Normalised return on equity edged 60 basis points (bps) lower to 22.1% for the year. Similarly, Breville’s full-year return on assets fell 110 bps to 13.0%.

The Breville share price will be an interesting one to watch this morning given the context of the result. Management was reasonably upbeat, citing strong topline growth and a “healthy” current business trajectory.

The company was wary of forecasting specifics into FY21 and FY22 given the “turbulence” caused by the coronavirus pandemic.

Breville continues to explore geographic expansion, with the Sage brand across Europe yielding strong net sales results. That brand is also now expanding to the Middle East, transitioning away from Breville in the region.

Foolish takeaway

Breville reported some strong headline numbers in this morning’s results. However, a “noisy” expense list with a number of impairments clearly ate into the company’s bottom line.

It will be interesting to see how the Breville share price trades early this morning following the full-year result.

Shares in the home appliance manufacturer have rocketed 54.5% higher this year while the S&P/ASX 200 Index (ASX: XJO) is down 8.4%.

More reading

• Flight Centre share price on watch after achieving cash flow target
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 drifts 0.1% lower, CBA reports solid FY20 result
• These ASX stocks could be the next reporting season heroes
• How the Santos share price could gain from COVID-19 stimulus

Motley Fool contributor Ken Hall 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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I think Aussie travel company Flight Centre Travel Group Ltd (ASX: FLT) is one to watch in early trade. The Flight Centre share price could be on the move today after the company issued a trading update highlighting strong cash flow and providing FY20 guidance.

What could move the Flight Centre share price?

The Aussie travel group reported a cash balance of $1.9 billion as at 30 June 2020 with ~$1.15 billion in liquidity.

That comes as Flight Centre looks to build a longer liquidity runway to manage the impacts of the coronavirus pandemic.

The company reported slowing COVID-19 cash burn with revenue above initial projections and costs at targeted levels.

That appears to be reflected in the company’s cash flows. Flight Centre recorded a $53 million net outflow in July in a good result for the company.

Notably, that is well below its $65 million monthly target as the group booked $17 million in monthly revenue.

Flight Centre’s outflow inclusive of the JobKeeper subsidy totalled $43 million for the month.

Flight Centre reported its corporate business was profitable in FY20 on an underlying basis. That included winning a record amount of new accounts with annual spends in the order of US$1.3 billion.

The Aussie travel group noted signs of corporate recovery in most countries while leisure travel continues to lag due to restrictions.

The Flight Centre share price is also worth keeping an eye on after the company’s latest guidance update.

The travel group expects to report an underlying FY20 loss of $475 million to $525 million. Taking into account one-off costs and writedowns, the statutory loss is anticipated to be $825 million to $875 million.

Much of these losses were incurred after March as governments imposed heavy travel restrictions to curb the spread of COVID-19.

Foolish takeaway

I think the Flight Centre share price is worth watching in early trade. Clearly, this isn’t all good news with the heavy expected losses being announced.

However, a longer liquidity runway and outperformance against cash flow targets is good news. The Flight Centre share price has fallen 70.4% lower this year to $11.69 while the S&P/ASX 200 Index (ASX: XJO) is down 8.4%.

More reading

• Breville share price on watch as dividends climb 10.8% higher
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 drifts 0.1% lower, CBA reports solid FY20 result
• These ASX stocks could be the next reporting season heroes
• Warren Buffett would applaud the share price gains of these undervalued ASX shares

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. 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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