Warren Buffett’s investment strategy seeks to use the market cycle to maximise returns. He has historically purchased high-quality companies when they trade at low prices during a market crash. He then holds them over the long run, during which time they often benefit from a subsequent market rally that propels their share prices higher.

Buffett has repeatedly been able to use this strategy because the market cycle is omnipresent. As such, the next market crash is never far away. Through following the Oracle of Omaha’s lead and using a patient approach that builds a cash balance, it is possible to outperform the stock market over the long run.

A market crash is always on the horizon

Even though many shares have surged higher following the 2020 market crash, history suggests they are very unlikely to rise in perpetuity. After all, no previous market rally has ever lasted indefinitely. They have always come to an end, with rapidly-falling stock prices usually following periods of high growth.

As such, it makes sense to always plan ahead for the next market downturn. Warren Buffett achieves this goal through only purchasing high-quality companies when they offer wide margins of safety. In doing so, he avoids overvalued businesses that may be negatively impacted to the largest extent by a market downturn. He also holds large amounts of cash at all times that can be deployed quickly should share prices temporarily fall to extremely low levels.

Warren Buffett is also able to use a market crash to his advantage because he takes a long-term view of his portfolio. A sudden market decline is only likely to be of major concern to an investor who has a short time horizon. For long-term investors who are concerned about their portfolio’s performance over the next decade, several months of paper losses are unlikely to cause issues for their financial future.

Implementing Warren Buffett’s strategy today

Clearly, when the next market crash will occur is a known unknown. However, history shows that it will occur at some point over the coming weeks, months or years. Therefore, following Warren Buffett’s strategy could be a sound move.

At the present time, this may mean avoiding overvalued companies that have soared as a result of improving investor sentiment. Instead, buying businesses that are underappreciated by investors, or that have wide margins of safety due to temporary operating disruption, could be a less risky move. They may offer greater return potential over the long run, as well as being less susceptible to the next market downturn.

Furthermore, holding some cash at the present time could be a shrewd move. Even though it means obtaining a low return due to low interest rates, cash allows an investor to capitalise on the next market crash. Over the long run, this strategy may be more profitable versus buying shares after they have already risen in value.

More reading

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• The Tabcorp (ASX:TAH) share price wobbles on results
• Carsales (ASX:CAR) share price slides despite earnings growth
• Why the Pro Medicus (ASX:PME) share price is getting thumped today
• Webjet (ASX:WEB) share price edges lower on H1 FY21 results

Motley Fool contributor Peter Stephens 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 Tabcorp Holdings Limited (ASX: TAH) share price is wobbling in early trading today after dipping almost 2% at the open. This follows the company’s release of results for the first half of FY21.  

At the time of writing, the Tabcorp share price is trading down 0.11% at $4.46.

How did Tabcorp perform?

For the half-year ending 31 December 2020, Tabcorp reported a 7% decline in net profit of $185 million. The gaming and entertainment services provider also saw revenue fall 2% to $2.87 billion.

Overall, Tabcorp’s group revenue declined 1.5% for the first half, while earnings before interest, tax, depreciation and amortisation (EBITDA) also came in lower, down 6.2% compared to the prior corresponding period.

Despite challenges imposed by the COVID-19 pandemic, Tabcorp’s Lotteries and Keno division saw strong digital growth, with revenue up 1.6% for the first half. However, the company’s gaming services division did not experience the same resilience. It plummeted 51% to $73 million for the first half, due to coronavirus-related venue restrictions.

In today’s results, Tabcorp highlighted that the company was emerging from the pandemic in a stronger financial position. As a result, Tabcorp declared that it would resume an 80% dividend payout ratio, equating to 7.5 cents per share, fully franked.

What is the outlook for the Tabcorp share price?

Tabcorp’s management also provided an outlook on the company’s recovery post-pandemic.

Tabcorp CEO David Attenborough said the company was “experiencing a strong recovery following the recent market challenges”.

Mr Attenborough said that all three businesses were “well-positioned for the second half and we will continue to unlock digital growth, drive operational improvements and optimise costs”.

Management also addressed the rumours of a potential takeover of its wagering and media business. It noted that the details of any proposal remained confidential, and were indicative and non-binding in nature.

Tabcorp also highlighted that any proposal would be highly conditional and subject to numerous requirements.

Foolish takeaway

At the time of writing, the Tabcorp share price is staying relatively flat after closing yesterday’s trading session at $4.46. The Tabcorp share price has soared more than 13% since the start of the year, fuelled by speculation on a potential takeover of its wagering business.

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• Tabcorp (ASX:TAH) share price soars 10% on potential buyout

Motley Fool contributor Nikhil Gangaram 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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Carsales.com Ltd (ASX: CAR) shares are slipping in morning trade following the release of the company’s results for the first half of the 2021 financial year (H1 FY21). At the time of writing, the Carsales share price has fallen 4.47% to $21.16.

What did Carsales report?

The Carsales share price is heading lower today despite the company delivering strong earnings growth in both its domestic and international markets for the half-year ending 31 December. That growth came despite headwinds resulting from the COVID-19 pandemic.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA)  increased 18% to $126 million. Adjusted net profit after tax (NPAT) of $74 million represented an increase of 17% from H1 FY20. Adjusted revenue was down 2% to $210 million.

(Adjusted figures are post-non-controlling interests and exclude certain non-recurring or non-cash items.)

The company reported earnings growth across all its segments, with the strongest EBITDA growth in its South Korean market, up 30% year on year.

Investors are driving down the Carsales share price after the company reported revenue of $199 million was down 7%. Meanwhile reported EBITDA was up 9% on the prior corresponding period and reported NPAT was $61 million, a decrease of 14%.

Carsales noted that its reported metrics were impacted by an $11 million COVID-19 dealer support package.

The company will pay an interim dividend of 25 cents per share (cps), up 14% on the 22 cents paid in the first half of the 2020 financial year.

Commenting on the results, Cameron McIntyre, Carsales CEO said:

Our ongoing investment in product and customer experience helped us continue strengthening our leadership positions in our largest markets of Australia, South Korea and Brazil. We saw traffic growth of 20% across our global network of automotive websites, demonstrating that we are the best place for our customers to buy and sell cars…

There are positive trends for our business emerging from the pandemic. We have seen accelerated migration to digital platforms across our global network of sites as evidenced by strong traffic growth. Demand for vehicles across all our markets has been strong due to lower public transport usage, the absence of international travel and the evolution of more flexible working arrangements.

Looking ahead, Carsales forecasts modest adjusted revenue growth and “solid” adjusted EBITDA and adjusted NPAT growth for the 2021 financial year, with the assumption there are no major changes to its current operating environment.

Carsales share price snapshot

Over the past 12 months, the Carsales share price is up 14%. That compares to a 3% loss on the S&P/ASX 200 Index (ASX: XJO).

Carsales shares have also surged from their post viral selloff last year, up more than 100% from the 23 March lows. Year to date, the Carsales share price is up 6.2%.

More reading

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com 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 Pro Medicus Limited (ASX: PME) share price has come under pressure this morning following the release of its half year results.

In early trade, the health imaging company’s shares were down as much as 17% to $38.00.

The Pro Medicus share price has since recovered slightly but remains 8% lower at $41.83 at the time of writing.

Why is the Pro Medicus share price crashing lower?

Investors have been selling Pro Medicus shares on Wednesday after its half year results fell short of the market’s lofty expectations.

For the six months ended 31 December, the company reported a 7.8% increase in revenue to $31.6 million. Management advised that the stronger Australian dollar impacted its result. On a constant currency basis, its revenue would have been up 12.4% to $32.9 million.

Currency headwinds also weighed on its profits. Reported underlying profit before tax came in 25.9% higher at $18.76 million but would have been up 29% to $19.7 million in constant currency.

On the bottom line, Pro Medicus delivered a 12.4% increase in net profit after tax to $13.5 million. This includes tax expense of $4.66 million, which represents a tax rate of 25.6%. This compares to a tax rate of 18.6% in 2019.

At the end of the period, the company had cash reserves of $50.9 million and no debt.

This strong balance sheet allowed the Pro Medicus board to declare a fully franked interim dividend of 7 cents per share.

How does this compare to expectations?

According to a note out of Goldman Sachs, Pro Medicus missed on both revenue and earnings.

The broker notes that Pro Medicus feel short of its revenue forecast by 9% and its EBIT forecast by 7%.

This goes some way to explaining the weakness in the Pro Medicus share price today.

What were the drivers of its growth?

Pro Medicus’ CEO, Dr Sam Hupert, revealed that the company performed well across all markets despite the restrictions of COVID-19.

He said: “It was a good six months across all jurisdictions. Examination numbers in the first three months of the quarter were still recovering from their April 2020 lows however we were able to make up for the decrease with new clients coming on stream and exam numbers tracking back to pre COVID levels.”

The star of the show for the company was arguably the Australian business, which delivered a 22.8% increase in revenue. This was largely due to the rollout of the Healius Ltd (ASX: HLS) contract and the extension of a contract with I-MED.

The company’s European operations also had a positive half. This is expected to continue in the second half thanks to its new contract with Ludwig-Maximilians University.

Outlook

No guidance or commentary was given in regard to its second half outlook. This may have disappointed investors and be contributing to the Pro Medicus share price decline today. Though, it is worth noting that this is customary for Pro Medicus.

Positively, Dr Hupert did speak briefly about the company’s sales pipeline.

He said: “We have had a very good run of contract wins over the past seven to eight months and pleasingly we have seen an increasing number of opportunities enter the pipeline in addition to those opportunities that have been progressing through the sales cycle. Importantly, the opportunities are across a range of market segments, including some for multiple Visage products, as well as a healthy mix of Cloud and non-Cloud.”

More reading

• What’s with the Pro Medicus (ASX:PME) share price today?
• A turbulent tale of 2 ASX biotech shares: Polynovo (ASX:PNV) and Pro Medicus (ASX:PME)
• ASX 200 down 0.7%: AGL & Origin sink lower, Qantas pushes higher
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• The Pro Medicus (ASX:PME) share price zoomed 25% higher in January

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 and recommends Pro Medicus Ltd. The Motley Fool Australia has recommended Pro Medicus 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 Webjet Ltd (ASX: WEB) share price is edging lower this morning following the release of its half-year results for 2021. In opening trade, shares in the online travel agent are marginally down 2% to $4.68.

Let’s take a look and see how Webjet performed for the H1 FY21 period.

Financial highlights

The Webjet share price is trading lower today after announcing a weak first-half result.

According to its release, Webjet reported heavy falls across its key business metrics due to COVID-19 government-mandated travel restrictions.

For the six months ending December 31, Webjet delivered a total transaction value of $267 million, down 89% over the prior corresponding period.

Group revenue plummeted to $22.6 million, dropping 90% over the same time last year. The biggest fall came from its WebBeds segment which sank from $127.5 million in H1 FY20 to $8 million for the reporting period.

Ongoing travel restrictions and lockdowns impacted bookings in all of its regions. The company noted that it is in the process of executing a transformation strategy that will see a 20% improvement in costs when at scale.

Expenses for the period were driven lower as a result of management’s focus on cash burn and cost reduction initiatives. For the period, Webjet recorded expenses at $62.7 million, a 52% decline on the prior comparable term.

Underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) sharply retreated with the company reporting a $40.1 million loss. This is a mammoth 146% plunge when matching against H1 FY20’s result.

For the end of December, Webjet recorded a strong cash position of $283 million to withstand prolonged periods of recovery. In contrast, the company’s monthly cash burn rate is $4.8 million per month. This gives Webjet enough breathing space to run operations for the next 5 years without raising additional funds or drawing down on debt.

In light of the expected results, the Board refrained from declaring an interim dividend due to the uncertain travel environment. Furthermore, management stated that it will further defer FY20’s interim dividend payment.

Previously the company planned to reward shareholders on the 16 April 2021 with 9 cents per share. However, this has been further delayed until next year, pending review of H1 FY22 results.

Management commentary

Webjet Managing Director, John Guscic, commented on the result:

These results reflect the devastating impact COVID-19 continues to have on the global travel industry. We remain focused on maintaining our strong capital position. Cost savings initiated across all businesses helped reduce cash burn, while allowing us to return staff to full time work.

Looking ahead, John Guscic appeared optimistic that the travel industry will quickly rebound once restrictions open up. He added:

The demand for travel – and in particular leisure travel – remains high. We believe people will want to travel as soon as they are able to and we are doing everything we can to ensure Webjet is there to capture demand when it happens.

…We are hopeful that global vaccine rollouts will enable travel to return to historical levels and our strong capital position provides flexibility to weather any protracted market recovery.

Review of the Webjet share price

Over the last 12 months, the Webjet share price has been one of the worst performers with a staggering fall of more than 60%. The company’s shares once comfortably above $10, however, the COVID-19 rout caused headwinds for Webjet.

In March, its share reached a multi-year low of $2.25 and has since travelled slightly higher in hope of a recovery in the travel market.

Based on the current share price, Webjet has a market capitalisation of around $1.6 billion.

More reading

• 5 things to watch on the ASX 200 on Wednesday
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• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• Is the Webjet (ASX:WEB) share price a buy right now?

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet 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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We’re watching the Whitehaven Coal Ltd (ASX: WHC) share price this morning following the release of the company’s half-year FY21 results. Over the previous 12-month period, the Whitehaven Coal share price sank over 36%.

Let’s take a look at the announcement to assess what it might mean for share prices. 

What will today’s results mean for the Whitehaven Coal share price?

Whitehaven Coal reported a half-yearly loss for FY21. This was due to the coronavirus pandemic rattling coal prices.

Consequently, the company posted a net loss after tax of $94.5 million for the six-month period. This is significant, compared to a profit of $27.4 million in the prior corresponding period (pcp). It is worth noting that the loss exceeds the UBS estimate of an interim loss of $53 million.

Whitehaven Coal revenue took a 21% hit to land at $699.3 million compared to $885.1 million in the pcp. Earnings before interest, tax, depreciation and amortisation (EBITDA) flopped 79% from $177.3 million to $37.2 million. Considering FY21 half-yearly earnings, the Board determined an interim dividend will not be declared.

However, the Whitehaven Coal share price has clawed up 20% over the previous six months. The company has reported $411.8 million of available liquidity.

CEO comments on Whitehaven Coal results

Whitehaven Managing Director and CEO, Paul Flynn, said this about the H1FY21 results:

“The impacts of subdued pricing on seaborne coal markets were a key feature of H1 results as COVID-19 impacts on economic and industrial activity continued to be felt.

The business responded strongly to these challenging market conditions, including through improvement measures that delivered meaningful cost reductions and greater operational efficiency, offsetting price headwinds to some extent.

We have closed out H1 FY21 with strong levels of liquidity, strong banking support and we are focused on retiring debt against the backdrop of the improving price environment.

With future savings targets identified and coal markets rebalancing in response to demand signals we are optimistic about achieving stronger outcomes through the second half.”

Moving Forward

Year-to-date, the Whitehaven coal share price has dropped 3.65%. With this in mind, it will be interesting to see how today’s announcement will impact Whitehaven’s share prices. 

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• Fossil fuels vs renewables: What’s ahead for ASX energy shares?
• ASX coal stocks increasingly isolated with rise of start-ups like MGA Thermal
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Motley Fool contributor Gretchen Kennedy 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 Charter Hall Group (ASX: CHC) share price is on watch this morning after the property business announced 14% growth of its funds under management to $46.4 billion.

In early trading the Charter Hall share price has fallen 5% in response to the report. 

If you haven’t heard of Charter Hall, it’s a diversified property business that owns and also manages a large property portfolio on behalf of shareholders various property funds including Charter Hall Long WALE REIT (ASX: CLW).

Charter Hall’s FY21 half-year result

The company reported that it generated $129 million of operating earnings, equating to operating earnings per share (EPS) of 27.8 cents. It generated $173 million of statutory profit.

Charter Hall managing director David Harrison said: “Notwithstanding the challenges presented by COVID-19, we have been well insulated by our on-going focus on long WALE properties leased to high quality tenants. As a result, we continue to enjoy the support of our investors who remain keen to invest alongside us in Australian commercial real estate.”

Property investment

Charter Hall runs its own property investment portfolio worth $2 billion. This portfolio generated a total property investment return of 10.9% for the period.

Management said that the earnings resilience and diversification of the property investment portfolio continues to remain a key strength, with the top 10 asset exposures representing only 10.4% of earnings and the portfolio is 80% weighted towards the Australian East Coast market. Portfolio occupancy was 97.1% and the weighted average lease expiry (WALE) improved from 8.7 years to 9.1 years.

The property investment yield was 6% for the half-year.

Property funds management

Charter Hall said that its fund management portfolio is now 8.5 million sqm in size, diversified across five sectors. The funds under management (FUM) grew by 14% to $46.4 billion, driven by $3.5 billion of net acquisitions (and $6.2 billion gross transactions), positive property revaluations of $1.1 billion and capital expenditure on developments of $1.2 billion.

The property business announced that it experienced $2.8 billion of gross equity allotment, comprising $766 million in wholesale pooled funds, $1.1 billion in wholesale partnerships, $392 million allotted in listed funds and $520 million in direct funds.

Management said it still had $6.4 billion of investment capacity to keep growing.

The property funds management yield was 4.8%, according to Charter Hall.

Balance sheet

A key focus of the business is capital management with $3.7 billion of new and refinanced facilities during the period and no material maturities in FY21 or FY22. Charter Hall said that it maintains financial flexibility and substantial funding capacity.

The weighted average gearing across the fund platform was 28%, which Charter Hall said was conservative.

Charter Hall distribution and outlook

Charter Hall reminded investors that the distribution for this result was 18.6 cents per security, representing growth of around 6%. The FY21 distribution is still expected to grow by 6% compared to FY20.

The group’s previous FY21 guidance was for post-tax operating EPS (OEPS) of approximately 53 cents per security. Assuming no material changes in the market conditions and the COVID-19 operating environment doesn’t significantly worsen, the FY21 guidance for OEPS is no less than 55 cents, excluding any accrued performance fees, which would represent a slight increase in underlying operating earnings.

More reading

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Motley Fool contributor Tristan Harrison 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 morning trade the Domino’s Pizza Enterprises Ltd (ASX: DMP) share price is pushing higher following the release of its half year results.

At the time of writing, the pizza chain operator’s shares are up 2% to $99.72.

How did Domino’s perform in the first half?

Domino’s was a very positive performer during the first half of FY 2021, delivering strong sales growth and even stronger earnings growth.

For the six months ended 31 December, Domino’s delivered total global food sales of $1.84 billion. This was an increase of $260.8 million or 16.5% over the prior corresponding period.

This strong top line growth was driven by same store sales growth of 8.5% and the opening of 131 organic new stores. The majority of its new store openings were in Japan, with 68 new stores. This was supported by 50 new stores Europe and 13 new stores in the ANZ market.

Thanks to margin expansion, Domino’s earnings before interest and tax (EBIT) grew at the even quicker rate of 32.3% to $153 million.

This was predominantly driven by its international operations, which delivered EBIT growth of 55.7% to $99.9 million. Its international operations now account for 65.3% of total EBIT. ANZ EBIT grew 9.8% to $63.7 million.

On the bottom line, the company’s underlying net profit after tax increased 32.8% to $96.2 million.

Also growing strongly was the pizza chain operator’s free cash flow. It came in 50.3% higher at $124.4 million.

This allowed the Domino’s board to declare an interim dividend of 88.4 cents per share (50% franked). This represents an increase of 32.5% over last year’s dividend.

Management commentary

Domino’s CEO and Managing Director, Don Meij, was very pleased with the company’s performance. He believes the result reflects experienced management and franchisees executing on a long-term strategy, rather than one-off costs or short-term sales attributable to COVID-19.

He said: “The performance this half predominantly reflects the benefits from investing in, and strengthening, our franchisee base and expanding our store footprint on a global scale, and the efforts of tens of thousands of our people executing against our strategy.”

“Despite the unique challenges of this time, store openings have accelerated with an average of five new stores opening each week, which reflects the confidence Domino’s, and our franchisees, share in our future. We intend to significantly outperform this strong result in the Second Half.”

Outlook

As Mr Meij stated above, Domino’s intends to “significantly outperform” its strong first half result in the second half.

And the company certainly is on course to do this, with total network sales growing 20.9% during the first seven weeks of the second half. This has been driven by same stores sales growth of 10.1% over the period. Management also revealed that it has already opened 11 new stores since the end of the first half.

Mr Meij commented: “We continue to experience uncertain times, but have confidence the clear principles that have delivered Domino’s success, before and during COVID-19, will guide this next phase.”

“Our team’s agile response to changing conditions has lifted our expectations for Full Year performance to be even higher than our already positive, medium-term outlook. With a strong balance sheet and franchisee profitability, we intend to accelerate expansion,” he concluded.

More reading

• Top brokers name 3 ASX shares to sell today
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises 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 Corporate Travel Management Ltd (ASX: CTD) share price is under pressure on Tuesday following the release of its half year results.

At the time of writing, the corporate travel specialist’s shares are down almost 2% to $17.71.

How did Corporate Travel Management perform in the first half?

Corporate Travel Management had a tough half due to the impact that COVID-19 has had on global travel markets.

For the six months ended 31 December, the company reported an 88% decline in total transaction value (TTV) to $403.8 million. This led to a 75% reduction in half year revenue (excluding government grants and other income) to $56.5 million.

Including government grants of $13.7 million and other income of $4 million, revenue was down 67% to $74.25 million.

On the bottom line, the company reported an underlying loss after tax of $26 million and a statutory loss after tax of $36.4 million. The latter compares to a pre-COVID profit of $32.9 million in the prior corresponding period.

At the end of the period, Corporate Travel Management had net cash of $119 million. This had reduced slightly to $115 million as of 15 February. The company also has a $178 million undrawn committed finance facility.

Unsurprisingly, the Corporate Travel Management board will not be declaring an interim dividend.

Management commentary

The company’s Managing Director, Jamie Pherous, remains positive on the future and notes that its operations are close to becoming break-even.

He said: “We are in a good position to capitalise on a recovery in corporate travel activity because we have a strong balance sheet with excess cash for further opportunities. We are now very close to a break-even position with new client revenue momentum and remain most leveraged to the largest travel markets that are also the most advanced in rolling out vaccinations.”

Mr Pherous also appears confident that the company will come out of the crisis in a stronger position. This is especially the case following its T&T acquisition and new client wins.

He explained: “We are positioned to be a significantly larger business post-COVID due to the strategic acquisition of T&T, the organic growth dynamics we are experiencing and a lower permanent cost base. Significant new client wins across all of our regions supported a better than expected first-half earnings result and have given us revenue momentum into the second half.”

“We have maintained service levels throughout the pandemic and continued to invest in our proprietary technology to deploy tailored solutions to quickly address changing client needs. In fact, technology spend is returning to pre-COVID levels. Our scale and financial strength, combined with CTM’s personalised service and tailored technology solutions, have translated into new client wins and growing market share globally,” he added.

Outlook

Given the continuing uncertainty regarding government travel restrictions and the efficacy of national vaccination programs, management advised that it is not in a position to provide earnings guidance for the second half.

However, it does expect its ANZ and European operations to be profitable during the half. This is thanks to vaccine rollouts, a lower permanent cost base, and ANZ domestic borders remaining largely open.

Mr Pherous concluded: “Whilst Australia and New Zealand have not commenced their vaccination programmes, USA and UK are well advanced. The UK (population 67m) has surpassed 15m vaccinations and the USA (population 329m) has surpassed 50m vaccinations. Both countries expect to have the high-risk segment of the population vaccinated in this quarter, potentially allowing a relaxation in travel restrictions, much earlier than ANZ. Given 70% of our pre-COVID revenue is derived from the UK and USA, we are well positioned for the incremental revenue gains from travel relaxations in these markets.”

More reading

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• Top brokers name 3 ASX shares 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 Corporate Travel Management 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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ASX mid-cap healthcare company Avita Medical Inc (ASX: AVH) released its second-quarter FY21 results to the market last week. Despite recording positive revenue numbers, the Avita share price has continued to slide lower over the last five days. At their current price of $6.40, Avita shares are now more than 30% below their 52-week high price of $9.58.

What does Avita do?

Avita is one of a number of biotech companies currently trading on the ASX specialising in skin tissue repair, particularly relating to serious burns or other traumatic injuries. Its competitors in this space include Polynovo Ltd (ASX: PNV) and New Zealand-based Aroa Biosurgery Ltd (ASX: ARX).

Avita’s flagship technology, its RECELL System, uses a sample of the patient’s own skin to create “spray-on skin cells” which can then be applied to wounds or other affected areas on the patient’s body. The company claims its technology harnesses the skin’s own regenerative properties to help heal severe wounds.

What was in the company’s results?

Avita reported a 57% year-on-year jump in revenues to $5.1 million for the December quarter. However, it’s worth noting that this result was actually flat against the previous quarter, ended 30 September 2020. Procedural volumes for the December quarter were also slightly lower than the prior quarter.

The company’s inability to provide any firm earnings guidance for the remainder of FY21 may have also scared away some investors, driving the Avita share price lower. Avita revealed that nearly half of its revenues came from just 20 accounts, all of which are exposed to the effects of COVID-19.

How does Avita stack up against its competitors?

Avita’s December quarter results were actually surprisingly similar to those of Aroa Biosurgery. Aroa, whose flagship product is a biodegradable tissue repair device originally derived from a sheep’s forestomach, reported revenues of NZ$5.9 million for the December quarter.

This is also similar to Polynovo. In a first-half trading update released to the market in January, Polynovo stated that sales revenues were up 31% versus the first half of FY20, despite slow months in November and December. This would imply first-half sales of a little over $11 million (1H FY20 sales revenue was $8.57 million), or about $5.5 million on an average quarterly basis. Again, this puts it roughly in line with both Aroa and Avita.

All three companies are also trying to expand their global footprint. Avita recently redomiciled to the United States, as this is where it generates the overwhelming majority of its revenues ($5 million of its $5.1 million December quarter revenues came from the US market).

Polynovo has been expanding rapidly into new European markets, most recently Poland and Turkey, and already has a presence in the US and Taiwan. And Aroa has recently received regulatory approvals to start distributing its products in India.

At the moment, it’s difficult to tell which of these companies will end up on top. The next 12 months may be a crucial period for Avita, Polynovo and Aroa. It will be interesting to see whether all three companies can deliver on their competing growth strategies.

More reading

• These are the 10 most shorted shares on the ASX
• A turbulent tale of 2 ASX biotech shares: Polynovo (ASX:PNV) and Pro Medicus (ASX:PME)
• Why AVITA, Baby Bunting, Kathmandu, & Webjet shares are sinking
• The AVITA Medical (ASX: AVH) share price plummets almost 6% in early trade
• Here are the 10 most shorted shares on the ASX

Rhys Brock owns shares of Avita Medical Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited and POLYNOVO FPO. The Motley Fool Australia has recommended Avita Medical 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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