The A2 Milk Company Ltd (ASX: A2M) share price will be one to watch on Thursday.

This follows the release of the fresh milk and infant formula company’s half year results this morning.

How did a2 Milk perform in the first half?

The good news for shareholders and the a2 Milk share price is that the company delivered a result in line with its downgraded guidance.

For the six months ended 31 December, the company reported a 16% decline in revenue to NZ$677.4 million. This compares to its guidance of ~NZ$670 million for the half.

In respect to earnings, a2 Milk posted a 32.2% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to NZ$178.5 million.

While this means that its EBITDA margin came in below its guidance of ~27%, this was due to Mataura Valley Milk acquisition costs. Excluding these costs, a2 Milk’s EBITDA margin would have been in line at 27%.

And on the bottom line, the company’s net profit after tax fell 35% over the prior corresponding period to NZ$120 million.

Finally, a2 Milk reported a NZ$9.2 million operating cash outflow for the period. This was due to an increase in inventory and a decrease in accounts payable. Nevertheless, the company finished the period with a massive NZ$774.6 million cash balance and no debt.

Why did sales and earnings decline?

There have been a number of factors weighing on the company’s performance and ultimately the a2 Milk share price.

The main one is of course weakness in the daigou and cross-border e-commerce (CBEC) channels. They have been significantly impacted due to disruption resulting primarily from COVID-19 related issues.

And although the company’s China label infant nutrition products grew sales by 45.2% to NZ$213.1 million and its Australian and US liquid milk businesses continue to growth, it wasn’t enough to offset this.

Also weighing on its performance was weaker gross margins. This was primarily due to recognising a stock provision of NZ$23.3 million, higher cost of goods sold for China label infant nutrition, pricing pressures, and an adverse product mix shift. The latter has seen a higher proportion of liquid milk to infant nutrition sales.

Guidance downgraded again

Although a2 Milk delivered a first half result in line with its guidance, it looks likely to fall short of its full year guidance. This could be bad news for the a2 Milk share price on Thursday.

Management commented:

“The pace of recovery in the daigou/reseller channel and in the CBEC channel has been slower than previously anticipated and the Company now expects revenue to be at the lower end of the previous guidance range.”

“A lower EBITDA margin range is now expected due to lower revenue, higher brand investment, longer daigou/reseller support, movements in foreign currency and adverse channel mix relative to what was anticipated in December.”

In light of this, it is forecasting FY 2021 revenue of ~NZ$1.4 billion. This compares to its previous guidance range of NZ$1.4 billion to NZ$1.55 billion.

As for its earnings, management now expects an EBITDA margin of 24% to 26% (excluding MVM acquisition costs). This compares to its previously downgraded guidance for an EBITDA margin of 26% to 29%.

It is also worth noting that this guidance assumes that actions it is taking to re-activate the daigou/reseller channel deliver a significant improvement in quarter-on-quarter growth in the fourth quarter.

The a2 Milk share price is down 31% over the last 12 months.

More reading

• 5 things to watch on the ASX 200 on Thursday
• What does Citi think about ASX reporting season so far? 
• 6 high profile ASX 200 shares reporting results this week 
• 5 things to watch on the ASX 200 next week
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. 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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If you’re wanting to boost your portfolio with some quality growth shares, then you might want to take a look at the ones listed below.

Here’s why these quality ASX growth shares have been tipped as ones to buy right now:

Kogan.com Ltd (ASX: KGN)

The first ASX growth share to consider buying is Kogan. While this ecommerce company was already growing at a strong rate prior to the pandemic, its growth went up several gears after COVID accelerated the structural shift to online shopping.

This has underpinned an exceptionally strong first half performance. For example, Kogan recently released its half year update and revealed a 96% increase in gross sales over the prior corresponding period.

But perhaps even better, is that its margins have been expanding. As a result, Kogan’s gross profit grew over 120% and its earnings before interest, tax, depreciation and amortisation (EBITDA) jumped over 140%.

While the worst of the pandemic is now behind us, the shift to online shopping still has a long way to go. This should mean Kogan benefits from this tailwind for some time to come.

Credit Suisse currently has an outperform rating and $21.08 price target on its shares.

ResMed Inc. (ASX: RMD)

A second ASX growth share to look at is ResMed. This sleep treatment-focused medical device company has been benefiting from tailwinds of its own over the last decade. The key one being the growing awareness of sleep disorders such as sleep apnoea.

This has underpinned very strong demand for ResMed’s industry-leading portfolio of products. Positively, with the majority of sleep apnoea sufferers still undiagnosed, the company still has a huge runway for growth over the next few decades.

In addition to this, ResMed has been tipped as a company that will benefit greatly from a shift to home healthcare. This is thanks partly to some smart investments in the out of hospital space over the last few years. This includes its US$800 million acquisition of Brightree in 2016.

Credit Suisse is also a fan of ResMed. It currently has an outperform rating and $29.50 price target on the company’s shares.

More reading

• These ASX retail shares are smashing sales expectations
• 3 explosive ASX growth shares to buy next week
• Got cash to invest? Here are 2 ASX shares to buy
• Why the Openpay (ASX:OPY) share price is surging higher today
• One year on and 50% up, the All Technology Index is booming

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 Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd and ResMed Inc. 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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Fortunately, in this low interest rate environment, the Australian share market has a large number of dividend shares offering generous yields.

Two that tick a lot of boxes are listed below. Here’s why these ASX dividend shares are highly rated:

Charter Hall Social Infrastructure REIT (ASX: CQE)

The first ASX dividend share to look at is the Charter Hall Social Infrastructure REIT. As its name implies, this real estate investment trust has a focus on high quality social infrastructure properties. This means properties with specialist use, limited competition, and low substitution risk. These include childcare centres and government properties.

At the end of the first half, the company had an occupancy rate of 99.7% and a very lengthy weighted average lease expiry (WALE) of 14 years. Management also advised that the number of leases on fixed rent reviews has increased to 63.3%, which bodes well for its future rental income growth.

In addition to this, thanks to a strong first half, management upgraded its FY 2021 distribution guidance to 15.7 cents per unit. Based on the current Charter Hall Social Infrastructure share price, this represents a 5.3% yield.

Goldman Sachs currently has a conviction buy rating and $3.45 price target on its shares.

Wesfarmers Ltd (ASX: WES)

This conglomerate recently released its half year results and reported a 16.6% increase in revenue to $17,774 million. Driving this was solid sales growth across much of the company but particularly from its key Bunnings business.

The hardware giant recorded an impressive 24.4% increase in Bunnings revenue to $9,054 million. Underpinning this growth was government stimulus and consumers redirecting their spending from holidays to home improvements.

Positively, on the bottom line, stronger margins led to Wesfarmers delivering a 25.5% increase in net profit after tax to $1,414 million.

Goldman Sachs was happy with the result and believes its growth can continue. It has a buy rating and $59.70 price target on its shares.

Furthermore, the broker is forecasting a fully franked full year dividend of $1.88 per share. Based on the latest Wesfarmers share price, this equates to a 3.7% yield.

More reading

• Is the Harvey Norman (ASX:HVN) share price next to do a capital return cashback?
• Goldman Sachs upgraded these ASX 200 shares after outstanding results 
• 3 reasons why the Wesfarmers (ASX:WES) share price could be a buy
• ASX 200 Weekly Wrap: ASX lower despite bumper dividends
• Top brokers name 3 ASX shares to sell next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers 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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On Wednesday the S&P/ASX 200 Index (ASX: XJO) gave back the previous day’s gain with a sharp decline. The benchmark index fell 0.9% to 6,777.8 points.

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

ASX 200 expected to rebound

It looks set to be a good day for the Australian share market after a strong night on Wall Street. According to the latest SPI futures, the ASX 200 is expected to open 54 points or 0.8% higher this morning. In late trade in the United States, the Dow Jones is up 1.4%, the S&P 500 is up 1.1%, and the Nasdaq index has risen 0.8%.

Afterpay half year results

All eyes will be on the Afterpay Ltd (ASX: APT) share price when the payments company releases its half year results. According to a note out of Morgan Stanley, the broker is expecting Afterpay to report active customers of approximately 13.6 million for the first half of FY 2021. This represents a 37.4% increase from 9.9 million active customers at the end of FY 2020. Updates on its international expansion in Europe and Asia will also be of interest to investors. Zip Co Ltd (ASX: Z1P) is also releasing its update.

Oil prices charge higher

It could be a good day for energy producers such as Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) after oil prices charged higher. According to Bloomberg, the WTI crude oil price is up 2.5% to US$63.19 a barrel and the Brent crude oil price is up 2.6% to US$67.07 a barrel. Oil prices rose amid continued outages in the United States and a weaker US dollar.

A2 Milk half year update

The A2 Milk Company Ltd (ASX: A2M) share price could be on the move today when it hands in its half year results. Late last year the infant formula company downgraded its guidance for the first half and full year due to weakness in the daigou channel. For the first half it expects to report revenue of ~NZ$670 million with an EBITDA margin of ~27%. For the full year, it has guided to revenue of NZ$1.4 billion to NZ$1.55 billion and an EBITDA margin of 26% to 29%.

Gold price falls again

Gold miners including Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) could come under pressure after the gold price softened further. According to CNBC, the spot gold price has fallen 0.5% to US$1,796.40 an ounce. Rising US treasury yields are weighing on the price of the precious metal.

More reading

• ASX 200 drops, Appen sinks, Nine jumps
• Why you should think long-term when investing
• Here’s why the Clearview Wealth (ASX:CVW) share price rose 3% today
• 3 things to watch when Zip (ASX:Z1P) releases its half year results
• Why is the Telstra (ASX:TLS) share price falling today?

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 ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia owns shares of AFTERPAY T 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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The S&P/ASX 200 Index (ASX: XJO) dropped by 0.9% today to 6,778 points.

Here are some of the highlights from the ASX:

Appen Ltd (ASX: APX)

Appen was the worst performer in the ASX 200 today, falling by 12% in response to its FY20 result.

The technology business reported that its revenue increased by 12% to $599.9 million. It said that it had a growing customer base including 136 new customer wins in 2020. There was also a 34% increase in the number of projects with its top five customers. It revealed that China revenue is growing by 60% quarter on quarter.

Appen’s committed revenue increased to 31% of the FY20 second half’s total revenue, up from 12% in the first half.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 8% to $108.68 million. The statutory EBITDA growth was stronger, rising by 23%. The underlying EBITDA margin declined by 70 basis points to 18.1%.

Whilst statutory net profit after tax grew 23% to $50.5 million, underlying net profit only rose by 1% to $64.4 million.

Appen decided to pay a final dividend of 5.5 cents, up 10% on the final FY19 dividend.

The company said that the FY21 year-to-date revenue plus orders is approximately $240 million. It’s expecting FY20 EBITDA to be between $120 million to $130 million, which is growth of 18% to 28% compared to FY20.

Nine Entertainment Co Holdings Ltd (ASX: NEC)

The Nine share price was the best performer in the ASX 200, rising by almost 10% after reporting.

The media company said that revenue was down 2% to $1.16 billion. It said that there was continued audience strength across all key platforms, with a marked improvement in advertisement markets through the second quarter, with strong growth in broadcast video on demand (BVOD) and free to air (FTA).

Whilst revenue dropped, Nine’s group EBITDA jumped 42% to $355.4 million and net profit after tax grew 69% to $177.7 million.

Looking at the broadcast segment, revenue fell 1% but costs declined 15%, leading to a 43% increase in EBITDA to $207.4 million. The EBITDA margin improved by 10.3 percentage points to 33.4%.

It was a similar story for publishing – revenue dropped 9%, but costs fell 17%, leading to EBITDA growth of 27% to $68.1 million. The EBITDA margin improved 7.3 percentage points to 25.9%.

Stan had a particularly strong half-year thanks to subscriber gains. Revenue grew 28% and costs only increased by 10%, leading to EBITDA growing by 161% to $36.5 million. The EBITDA margin increased by 12.5 percentage points to 24.5%. Stan recently launched Stan Sports as an additional plan to attract customers.

The company paid a half-year dividend of 5 cents per share, the same as last year.

Nine said that the advertising market continues to show strength right now, with television in-particular benefiting.

Other movements in the ASX 200

Looking at the green end of the share market, the Idp Education Ltd (ASX: IEL) share price rose 7.2% after reporting its result. The bronze medal went to the Platinum Asset Management Ltd (ASX: PTM) share price, rising by 6.4% after revealing its report.

At the red end of the ASX, the Nanosonics Limited (ASX: NAN) share price dropped 8.1% after reporting. The SEEK Limited (ASX: SEK) share price went down another 7.8% after revealing the sale of a large part of its Zhaopin stake.

More reading

• Here’s why the Clearview Wealth (ASX:CVW) share price rose 3% today
• Why is the Telstra (ASX:TLS) share price falling today?
• Top brokers name 3 ASX shares to buy today
• Why Appen, Bigtincan, Humm, & Nanosonics are tumbling lower
• Maggie Beer (ASX:MBH) share price surges on 20% sales growth

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Appen Ltd, Idp Education Pty Ltd, and Nanosonics Limited. The Motley Fool Australia has recommended Nanosonics Limited and SEEK 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 FINEOS Corporation Holdings PLC (ASX: FCL) share price will be on watch tomorrow after the insurance software business released its FY21 half-year result. It also announced a new contract.

The FY21 half-year numbers

FINEOS told investors that its half-year revenue increased by 30.1% to €52.6 million. This was made up of 20.1% organic growth and 10% growth from acquisition.

Software revenue was €19.1 million. There was organic subscription recurring revenue growth of 35.1% year on year, or 51.5% growth including the contribution from a US acquisition called Limelight Health (LLH) which was acquired in August 2020. Initial license fee (ILF) revenue was down 16.8% to €1.5 million, reflecting a run off of the old pricing model revenue.

Services revenue was €33.4 million in the first half of FY21. There was organic services revenue growth of 15.9%, or 23.3% growth in the contribution from LLH.

Gross profit rose by 20.1% to €33.8 million.

The company reported that its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 42.8% to €5.1 million and its statutory EBITDA fell 53.6% to €3.2 million.

FINEOS showed that there was a sizeable increase in its various spending categories including research and development (up 29.9%), sales and marketing (up 41.2%), cloud operations and support (up 434.7%) and general and administration (up 116.2%). The company explained that it continues to invest for growth and some of the expenses increased because of the higher headcount (up 40.8% to 1,043) after the LLH acquisition, as well as some one-off costs.

The company reported an underlying loss after tax of €2.5 million and a statutory net loss after tax of €5.1 million.  

Recent FINEOS share price movements

Over the last year the FINEOS share price is up around 15.7%. However, over the last six months the FINEOS share price has dropped almost 25%. 

FY21 outlook

FINEOS is expecting the FY21 revenue contribution to be in the range of €102 million to €105 million, after the foreign currency exchange impact.

The company reaffirmed its guidance of 30% growth in subscription revenue, that’s before the contribution from LLH which is expected be approximately €4 million of subscription revenue in FY21.

The company also announced a new client in ANZ, representing the first in the region to feature on the FINEOS platform in the cloud.

New contract win

FINEOS said that Partners Life has selected the FINEOS platform for life insurance and medical claims after looking at a number of options.

The company said that the contract is a small-sized 5-year initial term software as a service (SaaS) contract. The expected revenue is already factored into the guidance.

Partners Life chief claims officer Tracey Lonergan said:

“It was important that the provider had the capability, experience and infrastructure to deliver and support a claims management system that would integrate into the Partners Life ecosystem. Also important to us was that the selected vendor come with a strong record of successful implementations and strong support of its claims management system within the New Zealand and Australian life and health insurance industry. FINEOS met those requirements. Our initial collaboration has been extremely positive, and we envisage that the project will deliver high quality results.

More reading

• 3 ASX shares rated as strong buys by brokers
• 3 ASX shares rated as strong buys by brokers

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends FINEOS Holdings plc. The Motley Fool Australia has recommended FINEOS Holdings plc. 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 Smartgroup Corporation Ltd (ASX: SIQ) share price dipped 2.1% lower today after the salary packaging and fleeting management provider reported its 2020 full year results.

Due to multiple factors impacting the company’s performance during 2020, most stemming from COVID-19, most metrics fell compared to the prior year. Subsequently, some shareholders appear to have been disappointed by the result.

The Smartgroup share price closed at $6.89 today.

What moved the Smartgroup share price today?

Salary packaging and high unemployment

Indeed, the two don’t go particularly well together. For much of 2020, the unemployment rate was above the average experienced throughout 2019. Due to this unprecedented period of COVID-induced redundancies and closures, demand for salary packaging was certainly impacted.

Compared to prior years, Smartgroup’s salary packaging customer numbers did not experience the same level of organic growth. However, the company did onboard a new health client in late 2020, resulting in an additional 3,500 packages, and added to the novated leasing panel for 4 government departments.

Speaking of novated leases, volumes of the vehicle leasing arrangement fell by 14% compared to the prior year as a result of the economic disruptions.

All of this equates to total group revenue declining by 13% to $216.3 million. On the bottom line, net profit after tax was impacted by 25%, falling to $22.9 million.

How is Smartgroup positioned now?

Smartgroup’s cash position at the end of December 2020 was $27.4 million. This is a decrease from $39.6 million at the end of 2019. However, it is worth noting that the company’s borrowings reduced from $60.4 million to $24.7 million. This places Smartgroup in a better position with respect to its debt leverage.

The company also achieved $4 million of annual cost savings following a restructure of its operational workforce.

Smartgroup remains optimistic on its 2021 outlook. The company noted its recent win of another health client, adding another 8,000 salary packages.

The company has also declared a fully franked final dividend of 17.5 cents per share, as well as a fully franked special dividend of 14.5 cents per share.

CEO Tim Looi provided the following statement on the full-year results:

As the pandemic took effect, we moved quickly to focus on providing high quality service to our customers remotely and implementing cost containment measures. This, combined with our simplification program, resulted in a good operational and financial performance for the year

The Smartgroup share price has fallen 5% in the last year. That means the S&P/ASX 200 Index (ASX: XJO) outperformed the company, with a fall of 1.3% over the same period.

More reading

• 3 forgotten ASX stocks left behind in the car sales recovery

Motley Fool contributor Mitchell Lawler owns shares of SMARTGROUP DEF SET. The Motley Fool Australia has recommended SMARTGROUP DEF SET. 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 Service Stream Limited (ASX: SSM) share price could come under pressure on Thursday.

This afternoon the essential network services company released its half year results after the market close.

How did Service Stream perform during the first half?

Service Stream had a difficult six months and this was reflected in its results for the first half of FY 2021.

On the top line, the company posted a 17.7% reduction in revenue to $409.9 million.

This was driven by a small increase in Utilities revenue to $199.6 million and a 30% decline in Telecommunications revenue to $209.9 million. The latter was due to the conclusion of the NBN construction program last year and lower activation volumes. Wireless revenue also continued to track below expectations due to the slow ramp up of 5G expenditure.

This ultimately led to a 40.5% decline in first half net profit after tax to $16.2 million.

Positively, the company reported a strong cash flow result for the half year. It notes that its EBITDA to OCFBIT conversion ratio came in at 108%. This left it with a closing net cash balance of $10.5 million. This comprises cash-on-hand of $50.5 million and borrowings of $40 million.

However, in light of its profit decline, the Service Stream Board was forced to cut its fully franked interim dividend. It has reduced it by 37.5% to 2.5 cents. This will be payable to eligible shareholders on 14 April.

Outlook

Management has warned that the second half could be just as tough as the first. It expects COVID-19 related and client-initiated delays to work programs and shortages across client supplied materials, coupled with restrictions on movement and interstate travel bans, to continue for the reminder for the year.

In light of this, the higher contribution management had expected in the second half is unlikely to materialise. As such, it advised that it now expects the second-half result to be approximately in-line with the first half.

Management is, however, more positive on its long term prospects. It concluded:

“Whilst these results are subdued, the business continues to demonstrate strong fundamentals and has benefitted from our strategy to progressively diversify across critical utility infrastructure markets and to expand our service offerings.”

“These markets are well understood by Service Stream, and hold positive long-term outlooks associated with increased urbanisation and consistent expenditure associated with maintaining and upgrading critical infrastructure.”

“The business has a strong pipeline of organic growth opportunities linked to our core markets, and will continue to adopt a measured approach to assessing potential external growth opportunities, ensuring they will enhance the Group’s long-term performance.”

More reading

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• ASX 200 Weekly Wrap: RBA unleashes ASX’s inner animal
• These were the worst performing ASX 200 shares last week
• ASX 200 rises, Worley dumped, Mesoblast rises

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Service Stream 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 Macquarie Telecom Group Ltd. (ASX: MAQ) share price will be on watch tomorrow after the telecommunications business released its FY21 half-year result.

This is a diversified technology business. It generates earnings from data centres, cloud, cybersecurity and telecommunications. The clients are mid to large business and government customers.

How did Macquarie Telecom do in the FY21 half-year result?

Looking at the top line, revenue increased by 9% to $143.6 million.

All business units grew revenue. Macquarie Telecom said that it achieved particularly strong growth in cloud services and government. It also revealed that the data centres business has sold 10MW of IT load to a leading corporation. The company boasted that hosting revenue has grown revenue at a compound annual growth rate of 22.3% over the last three years.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 15% to $36.4 million. Cloud services and government EBITDA grew the most, rising by 33.3% to $18 million, whilst the telecommunications EBITDA fell 3.2% to $9.1 million. Data centres EBITDA grew almost 7% to $9.3 million.

Macquarie Telecom highlighted that the EBITDA margin for the overall business has improved from 19.6% in the first half of FY18 to 25.3% in the first half of FY21.

Net profit after tax (NPAT) went up 5% to $7 million. The company generated total operating cash flows of $13.6 million during the half-year.

The telecom business continues to migrate services to the NBN in line with its plan and expects to complete this by late 2021.

Investing for growth

The company said that its data centre in Canberra (Intellicentre 5 – IC5) was completed on time and on budget. The Intellicentre 3 East (IC3 East) is on budget and will achieve practical completion in March 2021.

Capital expenditure for the first half of FY21 was $32.9 million, excluding IC3. Customer growth capex was $13.9 million, up 20%, reflective of its continued data centre sales success and product mix, according to the company.

The company said it has drawn down $93.5 million of debt to support its data centre developments in IC3 East and Intellicentre 5 South Bunker in Canberra.

Commentary from the CEO

Macquarie Telecom CEO David Tudehope said:

Macquarie’s 20-year strategy of investing in world-class data centres is based on strong demand for data centre capacity as customers migrate to cloud and co-location services. The win, of the 10MW of IT load sold to a leading corporation, recognises the world class investment we have made in the Macquarie Park Data Centres Campus in Sydney’s North Zone.

Macquarie Telecom share price recent performance

Over the last year the Macquarie Telecom share price has risen by 77% over the last year. However, since the start of 2021, the Macquarie Telecom share price has been largely flat so far. 

Macquarie Telecom Outlook

The company said that FY21 EBITDA is expected to be approximately $72 million to $75 million.

It also revealed that the telecom division continues to win customers from legacy data and IP carriers with its NBN and SD WAN solution.

Total capex is expected to be between $57 million to $66 million, excluding IC3. The IC3 expenditure is expected to be between $123 million to $126 million.

More reading

• Why the Service Stream (ASX:SSM) share price could come under pressure on Thursday
• Why you should think long-term when investing
• The Singular Health (ASX:SHG) share price launched 27% higher today
• What on earth happened with the Payright (ASX:PYR) share price today?
• NEXTDC (ASX:NXT) share price on watch after strong half and guidance upgrade

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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“How many millionaires do you know who have become wealthy by investing in a savings account ?” – Robert G Allen. 

 

Putting money away into a savings account means gains are guaranteed. But it can also mean investment returns are minimised.

Interest rates are at all-time lows so returns on savings accounts are minimal. A savings account is a good place for an emergency fund, but it won’t provide an outsize potential upside.

That’s where share market investing comes in. But share market investing is not a short-term game. It can take time to grow your portfolio. And thanks to the impact of compounding returns, growth can be impressive. 

Think the long game

One key to successful investing is to allow returns to compound over time. This means reinvesting the money that you earn on your investments. If you gain interest on a savings account, you leave that interest in the account and start earning interest on your interest.

With ASX shares, you can reinvest dividends into more ASX shares. This means over time, as your returns earn returns, the overall size of your investment can grow exponentially. The key thing to note is that the impact of compound returns increases over time. 

This means that you have to be willing to be patient when investing. It can take time for investments to pay off, and some may fail. This is why it is important to spread investments across a variety of ASX shares (and other asset types, if applicable).

Doing this is known as diversifying. Many investors spread their investments across dividend shares such as Coles Group Ltd (ASX: COL) or BHP Group Ltd (ASX: BHP), as well as growth shares such as Afterpay Ltd (ASX: APT). Because you can’t predict the future, diversification means that you don’t have all your eggs in one basket. 

Short-term pain for long-term gain

Compounding works to magnify returns on investment as interest is earned on interest. Over time this can have a significant impact on portfolio value.

By re-investing your investment earnings instead of spending them, you can start to build a larger overall portfolio. This may be painful in the short-term, but it can pay off in the long term with bigger overall returns.

That’s why it pays to think long-term when investing. 

More reading

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• 2 high quality ASX dividend shares to buy now
• ASX 200 goes higher, Afterpay sinks, Adbri impresses
• Why the Afterpay (ASX: APT) share price is down 8% today

Motley Fool contributor Kate O’Brien owns shares of BHP Billiton Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. 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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