Category: Stock Market

At lunch on Monday the S&P/ASX 200 Index (ASX: XJO) is fighting hard for gains. The benchmark index is currently up 0.1% to 6,802.3 points.

Here’s what has been happening on the market today:

Costa full year results impress

The Costa Group Holdings Ltd (ASX: CGC) share price is flying higher today after smashing the market’s expectations with its full year results. For the 12 months ended 27 December, the horticulture company delivered an 11.2% increase in revenue to $1,164 million and a massive 108.4% jump in net profit to $59.4 million. Management advised that this was driven by strong demand and pricing. A recovery from domestic issues impacting the prior period also supported its performance. Analysts at Morgans were forecasting a $52.2 million net profit.

NIB delivers solid profit growth

The NIB Holdings Limited (ASX: NHF) share price is surging higher after it delivered solid half year profit growth. For the six months ended 31 December, the private health insurer reported a 1.1% decline in revenue to $1.3 billion but a 4.4% lift in underlying operating profit to $86.9 million. This reflects a 14.1% reduction in operating expenses to $172.1 million. On the bottom line, NIB posted a 15.9% jump in net profit after tax to $66.2 million. Morgans was forecasting an underlying operating profit of $82 million.

Macquarie swiftly upgrades guidance

The Macquarie Group Ltd (ASX: MQG) share price is charging higher today after it upgraded its guidance. This was just less than two weeks after issuing its guidance for a profit result slightly lower year on year. For the 12 months ending 31 March, Macquarie now expects its profits to increase ~5% to ~10%. The investment bank advised that extreme winter weather conditions in North America have significantly increased short-term client demand for its capabilities in maintaining critical physical supply across the commodity complex and particularly in relation to gas and power.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Monday has been the Costa share price with its 12% gain. This follows its full year results release. The worst performer has been the Reliance Worldwide Corporation Ltd (ASX: RWC) share price with a 7.5% decline. This morning the plumbing parts company released a very strong half year result but warned that its growth could moderate.

More reading

• Why Costa, Lovisa, OZ Minerals, & Tyro shares are racing higher today
• Here’s why the NIB (ASX:NHF) share price is storming higher today
• Why the Macquarie (ASX:MQG) share price is charging 4% higher
• Reliance Worldwide (ASX:RWC) share price in spotlight as it unveils 82% profit surge
• Costa (ASX:CGC) share price in focus after its results smash expectations

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Reliance Worldwide Limited. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and Macquarie Group Limited. The Motley Fool Australia has recommended NIB Holdings Limited and Reliance Worldwide Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The small-cap space erupted last week with the Province Resources Ltd (ASX: PRL) share price surging as much as 600% on its move to produce zero carbon-hydrogen.

While the Province Resources ship may have already left the port, here are three small cap ASX shares in the exploration and commodity space that have received a ‘speculative buy’ rating from broker Euroz Hartleys. 

Sovereign Metals Limited (ASX: SVM) 

Sovereign Metals has a 100% interest in the Kasiya project located in Malawi. Kasiya is a saprolite-hosted rutile deposit, otherwise known as an eluvial deposit. Rutile prices have been increasing recently.

Hartleys believes that Kasiya has all the hallmarks of developing into a significant rutile producer in the medium term. Based on the broker’s speculative assumptions, it seems possible the deposit could likely support a production size of 100 to 130 kt pa based on a 10mtpa plant. Despite the project’s medium to long term potential, the broker acknowledges its key risks, including project location (Malawi) and potential challenges in obtaining development capital. 

The broker maintains a target price of 60 cents which represents an upside of 42%. 

Tietto Minerals Ltd (ASX: TIE) 

Tietto Minerals continues to de-risk the development of its Abujar gold project, with the aim of becoming “West Africa’s next gold mine”. The company recently increased ownership in the project to 88% (at the mining stage) and pending its pre-feasibility study (PFS) results in the coming weeks, which will be the first look at the project’s economic parameters. 

Hartleys sees significant exploration upside with its current 3 million oz expected to grow. Ongoing drilling is improving resource confidence for optimised mine plans feeding into development studies. News flow from drilling is expected to be strong, and the PFS delivery a key milestone for the ultimate project development.

The Abujar PFS is due late in the first quarter of the calendar year 2021, with the study investigating a potential 3.5Mtpa open operation.

Hartleys coverage rates the company as a speculative buy with a target price of 70 cents per share or an upside of 89% to its current price. 

Legend Mining Limited (ASX: LEG) 

Legend Mining’s early metallurgical test work from the Mawson prospect within the Rockford project, Fraser Range in Western Australia, looks positive with high recoveries for copper and nickel.

Hartleys describes the project as catalyst rich, with a large and growing footprint auguring well for the next major discovery. 

The report cites that although the mineralised intrusive source has not yet been drilled out to economic status, this is just a matter of time. Based on the occurrence of high-grade massive sulphides within ultramafic intrusive rocks, net textures consistent with analogous major deposits and the presence of platinum group elements and gold.

The broker is ‘unwavering’ in its conviction with a speculative buy maintained and a target price of 30 cents.

Foolish takeaway

Small-cap ASX shares in the mining and exploration sector are fraught with risks as projects attempt to transition closer to producer status.

While Province Resources may have delivered eye-watering returns last week, investors who bought the top would have otherwise found a -40% hole in the pocket. 

More reading

• 4 ASX hydrogen shares powering forward in 2021
• Here’s why the Province Resources (ASX:PRL) share price has powered up 253% today

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is edging ever so slightly higher. At the time of writing, the benchmark index is up a few points to 6,796.8 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are racing higher:

Costa Group Holdings Ltd (ASX: CGC)  

The Costa share price has jumped 9% to $4.37 after the horticulture company released a stronger than expected full year result. For the 12 months ended 27 December, Costa reported an 11.2% increase in revenue to $1,164 million and a 108.4% jump in net profit to $59.4 million. According to a note out of Morgans, it was forecasting a profit of $52.2 million, whereas the market consensus was for a profit of $48.1 million. Strong demand and pricing were key drivers of its growth.

Lovisa Holdings Ltd (ASX: LOV)

The Lovisa share price has surged 14% higher to $14.93. Investors have been fighting to get hold of the jewellery retailer’s shares since the release of its half year results last week. While those results were weak, its improving performance has caught the eye of investors and also analysts at Morgans. This morning the broker reaffirmed its add rating and lifted its price target significantly to $17.95. It is very positive on its global rollout.

OZ Minerals Limited (ASX: OZL)

The OZ Minerals share price has stormed 8% higher to $22.81. Last week analysts at Macquarie responded positively to the copper producer’s full year results. The broker retained its outperform rating and lifted its price target to $24.00. It feels its shares are attractively priced given its growth profile and current spot copper and gold prices.

Tyro Payments Ltd (ASX: TYR)

The Tyro share price is up 9% to $2.96 following its half year results release. Tyro reported a 13% increase merchant numbers to 36,720 and a 10% lift in transaction through its platform to $12.1 billion. This underpinned a 464% increase in EBITDA to $8.5 million. But perhaps the biggest positive was that it hasn’t experienced any material changes to its normal churn rates since its outages earlier this year. In addition, it revealed that net merchant applications remain at normal levels.

More reading

• Why the Tyro Payments (ASX:TYR) share price is shooting higher
• Costa (ASX:CGC) share price in focus after its results smash expectations
• 5 things to watch on the ASX 200 on Monday
• Why Cochlear, Goodman, Lovisa, & Whispir shares are surging higher
• Lovisa (ASX: LOV) share price rockets 19% on half year results

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Tyro Payments Ltd (ASX: TYR) shares are shooting higher today after the payment solutions provider released its results for the financial half year ending 31 December (H1 FY21). At the time of writing, the Tyro share price is trading 6.62% higher at $2.90.

What did Tyro Payments report?

The Tyro share price is surging higher in morning trade after the company reported a 13% increase in the number of merchants using its payments solutions. Merchant numbers reached a record high of 36,720 in H1 FY21, up from 32,450 in the first half of the 2020 financial year.

Tyro also revealed it had achieved a new record high in the transactions processed by its merchants, up 10% to $12.1 billion.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at $8.5 million. That’s up 464% from the $1.5 million reported in H1 FY20.

Revenue for the half was $114.8 million, an increase of 2.1% from the previous corresponding period.

Statutory net profit after tax (NPAT) was still negative, but losses narrowed by 82% to $3.4 million, down from $19.2 million in the previous corresponding half.

Commenting on the results, Robbie Cooke Tyro CEO said:

We are proud to have processed a record $12.1 billion in transactions for our merchants. This was achieved despite the continuing challenges from COVID and unpredictable lockdowns. Our merchants saw solid growth in the half, while our market leading solutions continued to attract new merchants to our platform.

Looking ahead, the company remains focused on repairing any lingering damage from its terminal connectivity failures in January this year.

Cooke stated:

Whilst we continue at pace with our planned initiatives to drive growth and build our ecosystem centred around payments and enhanced by value adding features and products, our first priority over the next six months is to do all that we can to rebuild trust with those of our merchants impacted by the terminal connectivity issue triggered on 5 January.

He added:

We are now building a ‘failover’ solution. This will see us provide all our merchants with a dongle solution in combination with their standard terminals as an extra level of redundancy – this is an industry first move.

Tyro share price snapshot

The Tyro share price has yet to fully recover from the heavy hit it endured during the wider COVID-19-driven market rout during February and March last year. Over the past 12 months, Tyro shares are down by nearly 29%. By comparison, the All Ordinaries Index (ASX: XAO) is flat over that same period.

With today’s intraday gains taken into account, year to date, the Tyro share price is down by around 14%.

More reading

• Should short selling be banned?
• Short sellers doubling down on these ASX stocks despite the GameStop saga
• The Tyro (ASX:TYR) share price has crashed over 20% in the past month
• Here’s why the Tyro (ASX:TYR) share price is in focus today
• Why IDP Education, Lake Resources, Mach7, & Tyro shares are shooting higher

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Bapcor Ltd (ASX: BAP) is down around 1% after announcing news about its CEO.

Bapcor is a large auto parts business with a number of different divisions including Burson and Autobarn.

Here’s what the company announced about its boss.

Bapcor CEO extends his tenure

The Bapcor board announced that the CEO and managing director Darryl Abotomey has agreed to extend his tenure to 31 October 2023. He has been the leader of Bapcor since September 2011.

The Bapcor Chair, Margie Haseltine, said:

We are delighted that Darryl is extending his leadership of Bapcor through to October 2023. Under Darryl’s guidance Bapcor has been one of the top performing ASX listed companies since it listed in April 2014, going from strength to strength, year after year.

Bapcor has a clear 5-year strategic plan including specific targets, with many of the projects underway and which will be brought to fruition during Darryl’s remaining tenure.

What else has been happening recently?

Last week the auto parts business announced its FY21 half-year result.

Bapcor said that along with strong financial performance, it has continued to progress major projects that will underpin the group’s future success. It said it’s in a very solid financial position and capable of capitalising on opportunities as they arise.

The auto parts business reported that its revenue from operations grew 25.8% to $883.6 million. Pro forma earning before interest, tax, depreciation and amortisation (EBITDA) went up by 36.5% to $145.6 million, pro forma net profit after tax (NPAT) grew by 54% to $70.2 million and pro forma earnings per share (EPS) rose 28.9% to 20.7 cents.

Whilst the net debt grew from $109.2 million to $120.4 million, the leverage ratio improved from 2.3x to 0.6x.

The Bapcor board decided to declare a fully franked interim dividend of 9 cents per share, up 12.5% compared to the prior corresponding period.

Bapcor said that it continues to have avenues to drive the performance of the business including further network growth, realising operational efficiencies and expansion of the own-brand product range. It also continues to work on its new distribution centre in Victoria as well as its online capabilities.  

More reading

• 2 ASX 200 shares to buy for growth
• Bapcor (ASX:BAP) share price stalls despite record results
• 2 ASX 200 shares to buy for growth
• 2 ASX shares to own according to fund managers
• 3 compelling ASX shares rated as buys by brokers

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Amaysim Australia Ltd (ASX: AYS) shares are edging higher following the release of the company’s half-year results. At the time of writing, the Amaysim share price is trading 0.65% at 77.5 cents. 

The financial results for the half year ending 31 December (H1 FY21) are likely to be the last from the company, as it looks to delist from the ASX at the end of March.

What did the company report?

The Amaysim share price is pushing higher after this morning’s update in which the company summarised the sale of its energy business to AGL Energy Limited (ASX: AGL). The sale occurred on 30 September last year for an all cash consideration of $115 million.

A month later, on 2 November, Amaysim took a step towards winding up the company when it announced the intent to sell its mobile segment to Optus Mobile for $250 million. That announcement saw the Amaysim share price leap more than 10% on the day.

On 21 January, shareholders voted in favour of the mobile segment sale, which was completed on 1 February.

Regarding its half-year results, the company noted:

The half year results for the six month period to 31 December 2020 comprise of Energy, being a discontinued operation, and Mobile that is considered a discontinued operation held for sale during the period.

With that caveat in mind, net profit after tax (NPAT) from both the energy and mobile segments came in at $6.52 million in H1 FY21, up 65% compared to the previous corresponding period.

Amaysim reported a 7% decline in revenue from ordinary activities, while diluted earnings per share (EPS) were 2.06 cents, up from 1.27 cents in H1 FY20.

The company will not pay any dividends for the half year. Amaysim noted its main asset is now a material cash balance and it is currently subject to an unconditional off-market takeover offer from WAM Capital Limited (ASX: WAM).

If all goes to plan, Amaysim will pay its major distribution in April and expects to pay the final distribution around October

Amaysim expects to delist from the ASX on 31 March.

Amaysim share price snapshot

The last 12 months have been good for shareholders, with the Amaysim share price up by more than 140%. By comparison, the All Ordinaries Index (ASX: XAO) is flat over that same period.

Year to date, the Amaysim share price is up 1.97%.

More reading

• Why is the WAM Capital (ASX:WAM) share price on the rise?
• Top brokers name 3 ASX shares to sell next week
• Wilson Asset Management (WAM) thinks these 2 ASX shares are a buy
• Here’s why the AGL (ASX:AGL) share price is climbing higher today
• ASX 200 down 0.1%: Telstra update impresses, AMP sinks, Newcrest jumps

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Bank of Queensland Limited (ASX: BOQ) share price will be one to watch closely this week.

This morning the regional bank announced plans to raise funds to make a huge acquisition.

What did Bank of Queensland announce?

This morning Bank of Queensland announced that it has entered into an agreement to acquire 100% of Members Equity Bank (ME Bank) for a cash consideration of $1.325 billion. This acquisition will be funded by an underwritten capital raising of $1.35 billion.

According to the release, management believes the acquisition of ME Bank will be transformational and that the two businesses are strategically aligned.

It is expected to deliver material scale, broadly doubling the Retail bank and providing geographic diversification.

It also notes that it will combine two strong complementary trusted brands, with shared customer-centric cultures and differentiated customer segments.

Further, management sees a clear pathway to a scaled, common, cloud based digital Retail bank technology platform.

What about the financials?

Positively, Bank of Queensland believes the acquisition will be financially compelling.

It is expected to be low double-digit to mid-teens cash earnings per share accretive including full run-rate synergies in the first year (FY 2022). It is also expected to be cash return on equity accretive, by over 100 basis points including full run-rate first year synergies.

Synergies are expected to reach $70 million to $80 million pre-tax by year three.

The two businesses will have pro forma total assets over $88 billion, with total deposits of more than $56 billion.

Based on ME Bank’s latest results, the acquisition price represents an implied acquisition multiple of 1.05x reported book value and 11.9x cash earnings.

Bank of Queensland’s Chairman, Patrick Allaway, commented: “Today’s announcement is another major step in our strategy to be the leading customer-centric alternative to the big banks. With the addition of the ME Bank business, BOQ now has material scale and a compelling growth platform to support this ambition.”

“The combination of our highly complementary businesses brings together two organisations with a shared purpose and values generating greater value for customers, employees and shareholders. This is underpinned by the successful revitalisation of the bank since early 2020 with the team’s strong execution capabilities being reflected in our earnings progress to the half,” he added.

Capital raising

Bank of Queensland is raising the funds via a $1 billion underwritten 1 for 3.34 accelerated pro-rata non-renounceable entitlement offer and a $350 million underwritten institutional placement.

The offer price for both the placement and the entitlement offer will be $7.35 per share, representing a 12.6% discount to Bank of Queensland’s last close price of $8.41 on 18 February.

The Bank of Queensland share price will return from its trading halt once the placement is complete.

More reading

• Bank of Queensland (ASX:BOQ) shares halted ahead of potential $1.3bn ME Bank acquisition
• Bank of Queensland (ASX:BOQ) shares hit a 52-week high today

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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Advertising provider oOh!Media Ltd (ASX: OML) has revealed devastating numbers across the board for calendar year 2020, while also showing signs of recovery out of COVID-19. 

For the year ending 31 December, the “out of home” ad company saw:

• A 34% drop in revenue, reporting $426.5 million
• A net loss after tax excluding acquisition-related amortisation of $8 million, compared to a profit of $52.4 million in 2019
• Underlying EBITDA of just $63.2 million, which is less than half of $139 million recorded in 2019

“Out of home” advertising includes placements like trains stations, airplanes, shopping centres and roadside billboards.

People staying home due to the coronavirus downturn hammered that subsector much worse than other parts of the industry, according to oOh!Media chief executive Cathy O’Connor.

So the company had to act “quickly and decisively”, she said.

“That included a $167 million equity raising, refinancing of debt facilities, negotiation with property partners to deliver $63 million in net fixed rent savings, capital expenditure reduction of $49 million and operational cost savings of $16 million (excluding JobKeeper).”

The company, which previously had a 6% yield, will continue to suspend dividends.

Optimism for post-COVID recovery

Despite the unflattering numbers from 2020, the prospect of vaccines and workers returning to physical commuting has oOh!Media confident about 2021 and beyond.

Already in the 4th quarter of 2020 the company was back to 70% of pre-COVID revenue, compared to just 57% in the 3rd quarter.

O’Connor also expects to cut further costs.

“The company remains focused on margin growth through the recovery cycle by achieving rent reductions beyond 2020, delivering structural cost savings approaching $10m annual run rate achieved at the end of calendar year ’20 and remaining disciplined on capital expenditure.”

Investors seemed to also take the optimist view, sending the oOh!Media share price 6.4% higher in early trade on Monday.

Lennox Capital equity analyst Olivia Salmon said last month that one of her regrets out of 2020 was not buying into oOh!Media when it executed the emergency capital raise.

“This was a make-or-break capital raise for the company, and this was at the height of the pandemic. We were just too nervous about those earnings coming through.”

The share price was down to 59 cents near the end of March. It is trading now at $1.57, while it had surpassed $3.60 in the middle of 2019.

oOh!Media plays in a pretty reliable space, according to Salmon.

“What you’ve obviously seen is the ad market improve out of sight. Outdoor media is one of these assets that I think will be around for the long term and is unlikely to really be cornered out by digital advertising any more than it already has been.”

More reading

• Amaysim (ASX:AYS) share price higher as company moves to delist
• Bank of Queensland (ASX:BOQ) to raise $1.35bn to acquire ME Bank
• BlueScope (ASX:BSL) share price slides on results
• Why the Lendlease (ASX:LLC) share price is slipping today
• Here’s why the NIB (ASX:NHF) share price is storming higher today

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has recommended oOh!Media Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The BlueScope Steel Limited (ASX: BSL) share price is edging lower this morning following the release of its first-half results for FY21. At the time of writing, the steel producer’s shares have backtracked 2.78% to $16.80.

Let’s take a look and see how the company performed for the period.

What are the highlights?

The BlueScope share price is coming under pressure today despite reporting a positive set of numbers.

In this morning’s release, BlueScope advised it achieved a solid performance across its key business metrics.

For the six months ending 31 December, BlueScope delivered total sales revenue of $5,817.4 million, down 1% on the first half of FY20. The slight fall was attributed to lower selling prices caused by unfavourable currency exchange movements in the Australian dollar despite improved demand.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came to $772.5 million, up 75% on the prior corresponding period. Stronger steel spreads such as reduced raw material costs and a lift in volumes from demand supported its operating profitability. The company’s largest steelmaking business in Australia and the United States particularly saw strong recovery rates.

Underlying net profit after tax (NPAT) grew to $332.8 million, increasing 67% over this time last year.

After capital expenditure, total group cash flow stood at $265.1 million, a jump of $305 million from H1 FY20.

BlueScope closed the first half with a net cash position of $305.1 million. Previously, the group recorded net cash of $79 million at the end of June last year.

The board declared an unfranked interim dividend of 6 cents per share to be paid to shareholders on 30 March 2021. This is the same amount as management handed out to shareholders in the H1 FY20 period.

Outlook

Looking ahead, BlueScope noted that order and dispatch rates in its key markets remain healthy. Spot steel spreads in North America are forecast to be materially higher than H1 FY21 and longer-term averages. However, due to COVID-19 uncertainty, the business cautioned that the favourable trading conditions might not be sustained.

As a result, BlueScope predicts that underlying EBIT will be in the range of $750 million and $830 million. This will be dependent upon future spread, foreign exchange and market conditions.

About the BlueScope share price

Over the last 12 months, the company’s shares have risen to more than 26%, reflecting a recovery in the sector.

During March, BlueScope shares fell to a low of $8.03 before gradually moving along an upwards trend. The company achieved a 52-week high of $18.80 just last month.

Based on the current share price, the company has a market capitalisation of $8.7 billion.

More reading

• Reliance Worldwide (ASX:RWC) share price in spotlight as it unveils 82% profit surge
• Real reporting season surprise isn’t about profits but dividends
• The latest ASX stocks to be hit by broker downgrades
• The BlueScope (ASX:BSL) share price surges on a profit upgrade today

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Lendlease Group (ASX: LLC) shares are slipping in morning trade after the international property and infrastructure company reported its half-year results. At the time of writing, the Lendlease share price is trading down 0.76% to $11.80.

What’s moving the Lendlease share price?

Challenging operating conditions

The Lendlease share price is on the slide in morning trade despite the company reporting it has recovered from the worst of last year’s COVID-19 slowdown. However, activity still remains below pre-pandemic levels for the property management and development group.

Given the company is reflecting on results compared to the period before the world ground to a halt, there was a common theme throughout its report. In most cases, FY21 half-year results were down compared to the prior corresponding period.

However, Lendlease is reporting that momentum continues to build from the second half of FY20. As CEO and managing director Steve McCann noted, “Core operating EBITDA was $405 million, a significant improvement from the second half of FY20, although lower than the $525 million in HY20.”

Furthermore, the challenging operating conditions impacted each of the company’s business segments. Yet, it wasn’t all bad news, as the weaker environment allowed the company to seize urbanisation projects on attractive terms. These include city blocks in New York and the La Cienega Boulevard in Los Angeles, with a combined estimated end value of $1.8 billion.

The challenging period resulted in a 37% hit to Lendlease’s statutory profit after tax, at $196 million, down from $313 million. Investments were the heaviest impacted during the period, with the segment down 46% compared to last year. This was due to significantly fewer fees derived from asset management. 

Outlook for Lendlease

Lendlease continues to shift towards a focus on core urbanisation and investment platforms. Currently, the development pipeline is $110 billion and is growing with additional projects in US and European cities. However, as international COVID-19 impacts linger, management remained cautious of near-term conversions.

The big standout is the urbanisation pipeline for Lendlease. As mentioned in the update by Mr McCann:

Our urbanisation pipeline is expected to create more than $50 billion of institutional grade assets for our investment partners and the Group’s investments platform. We expect to more than double our current $38 billion in funds under management as this pipeline is delivered.

Due to the impacted result, Lendlease expects to pay an interim dividend of 15 cents per share. This represents a decrease of 50% from the 30 cents per share interim dividend paid last year.

The Lendlease share price has fallen by more than 38% over the past twelve months. 

More reading

• Here’s why the Lendlease (ASX:LLC) share price is wobbling today
• Real reporting season surprise isn’t about profits but dividends

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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