The Commonwealth Bank of Australia (ASX: CBA) share price just pushed into positive territory for 2020. The CBA share price started the year just shy of $80 before the March selloff sent it freefalling to $54 per share. This week, it finally pushed over the $80 level following positive coronavirus vaccine updates, reopening borders and encouraging economic data. 

At the time of writing, The CBA share price is trading at $83.56, up 0.45%.

Unprecedented strength from big four banks 

The big four banks have done much of the heavy lifting for the S&P/ASX 200 Index (ASX: XJO) after running more than 20% since October. New data has revealed that the economic recovery from COVID-19 is gathering pace.

In the context for banks’ earnings, the Australian Banking Association (ABA) has found that the number of loan deferrals has fallen below 300,000 nationwide. This compares to the peak of more than 900,000 loans deferred. 

In the case of Commonweath Bank, it experienced a net reduction in total loan deferred facilities of 59% during the month of October. Approximately 52,000 loans remained in deferral as at 31 October, down 75% from the total as at 30 June 2020 (210,000). 

Economic turnaround taking place 

In the RBA’s opening statement to the House of Representatives Standing Committee on Economics, Governor Philip Lowe said that economic news had been better than expected.

He said that over recent months, the number of people in employment had risen significantly, and the peak in the unemployment rate was now likely to be 7 and 8 per cent, rather than close to 10 per cent.

Retail spending has continued to increase, with consumers adjusting their spending patterns. Business and consumer confidence has lifted significantly, and housing markets have generally proved resilient. 

GDP growth ‘solid’

Given these developments, the RBA is now expecting GDP growth to be “solidly positive” in both the September and December quarters. And then, next year, a central scenario for the economy to grow by 5 per cent and a further 4 per cent over 2022. 

Back in November, the RBA announced another major policy package that included a reduction in the cash rate target to 0.10 per cent and the introduction of a quantitative bond purchase program. This involved the RBA buying $100 billion of government bonds over the next 6 months. 

These measures will support the economy through a number of channels. Lower borrowing costs will free up cash flow and incentivise households and businesses to spend. Lower interest rates will also support asset prices, which boost balance sheets, consumption and investment. The end result is a stronger economy and more jobs. 

More reading

• ASX 200 up again on Wednesday
• ASX 200 up 0.7%: CBA update, IGO enters lithium market, Healius jumps
• Commonwealth Bank (ASX:CBA) share price higher on divestment update
• Here are the ASX bank shares rated as a buy today
• Which ASX 200 sectors performed the best in November? 

Motley Fool contributor Lina Lim 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

While the United States still has a long way to go to match China as a cashless society, PayPal Holdings Inc (NASDAQ: PYPL) is helping the U.S. bridge the gap. PayPal has struck deals with several major retailers to use its QR code solution at checkout. If its technology becomes more widely adopted, PayPal will cement its position in the rapidly expanding digital payments market. 

Here’s what PayPal’s QR code solution could mean for its growth.

A momentous year for PayPal

PayPal Holdings reported stellar earnings results through 2020, as mobile payment adoption soared during the pandemic. In the third quarter, total payment volume and revenue grew 36% and 25%, respectively, excluding currency changes. That’s the strongest growth in the company’s history. 

Even though more people are using mobile payments, the U.S. still lags China, where 53.5% of the population is estimated to use in-store mobile payments, according to eMarketer. In 2019, 64 million people in the U.S. used in-store mobile payments, which is about one-fifth of the population. That gap in mobile payments usage between the U.S. and China is PayPal’s opportunity.

PayPal is on pace to gain 70 million net new active accounts in 2020. Those new customers should bring in even more transactions and fuel further growth for PayPal’s platform, which just hit a record 4 billion transactions processed in the third quarter. 

Growth in new customers is not a problem for PayPal. The real challenge is figuring out ways to increase the frequency that users transact with their accounts for everyday purchases. Since PayPal makes most of its money by charging fees for each transaction processed, increasing customer engagement is a key ingredient to driving revenue growth and fueling returns for shareholders.

As of the third quarter, PayPal’s transactions per active account stood at 40, which means users made a transaction at a rate of less than once per week over the last year. It is encouraging that PayPal can generate $20 billion in revenue and $3.1 billion in net profit with customers using their account as infrequently as they currently do.

Just imagine what those numbers would look like if PayPal achieves its long-term goal of making its platform an everyday use case for its users. Revenue and profits would certainly be multiples higher than they are now. PayPal’s new QR code checkout solution is taking a big step in that direction.

Major retailers are adopting PayPal’s checkout technology

In May, PayPal announced that its QR code payment solution was available to buy and sell goods across 28 markets worldwide. It was marketed as a “touch-free way to buy and sell in-person.” Given PayPal’s 361 million active customer accounts, it didn’t take long for large retailers to sign up to tap into that large installed base of users. 

In July, CVS Health‘s pharmacy chain became the first national retailer to integrate PayPal and Venmo QR code technology at checkout across 8,200 CVS Pharmacy stores. 

More deals have followed, including with Nike and Bed Bath & Beyond. There could be more announcements coming, as PayPal remains in talks with more than 100 large retailers. 

The launch of its QR code solution does more than expand PayPal’s addressable market to offline payments. For example, when people use two or more of PayPal’s products, including checkout solutions and peer-to-peer payments, it drives down customer churn by 50%. In other words, QR codes are another way to make PayPal’s brand more ubiquitous, easier to use, and a stickier experience for customers.

PayPal’s move into offline retail will be a “multiyear journey,” as CEO Dan Schulman explained during the third-quarter conference call. But he also acknowledged that management is already seeing “strong early adoption” of its QR code technology, which is a great sign for the company’s long-term growth prospects. 

PYPL data by YCharts

Investors are high on PayPal’s prospects

This growth stock has seen its valuation stretch to a high forward price-to-earnings (P/E) ratio of 57 recently. That could limit further gains in the very near term, but PayPal can grow into that valuation over the long term. Management believes the business is now on a trajectory to grow faster than the original medium-term outlook of 17% to 18% annual currency-neutral revenue growth. 

It might be tempting for investors who bought shares earlier this year to sell and lock in quick gains, but given the enormous opportunities PayPal still has in a wide-open market, this is a stock worth holding for the long haul.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Afterpay (ASX:APT) share price under pressure by US BNPL giant

John Ballard owns shares of Nike and PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Nike and PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends CVS Health and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia has recommended Nike and PayPal Holdings. 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 Starpharma Holdings Limited (ASX: SPL) share price has surged higher on Thursday following the release of a big announcement.

At the time of writing, the biopharmaceutical company’s shares are up 15% to $1.50.

What did Starpharma announce?

This morning Starpharma announced that significant commercial and regulatory progress has been made for its Viraleze nasal spray.

According to the release, the European Union (EU) regulatory dossier is now more than 90% complete, which means Viraleze is on track to be registered and ready for market in the first quarter of calendar year 2021.

This is earlier than the company was expecting and had previously announced.

What is Viraleze?

Viraleze will be marketed as an antiviral nasal spray for SARS-CoV-2, which is the coronavirus that causes COVID-19.

It will also be marketed as an antiviral nasal spray for other important respiratory viruses such as influenza and RSV.

Management believes Viraleze will “form part of a range of preventative measures such as masks and other PPE, and is complimentary (sic) to COVID-19 vaccines to further reduce risk of infection.”

What’s next?

Starpharma has revealed that its pre-launch commercialisation activities for Viraleze are well advanced with input from Boston Consulting Group.

Activities are initially focusing on direct to consumer and business-to-business channels to facilitate the most rapid entry to market. In addition to this, the company is continuing partnering discussions.

Europe will be the first geographic region for the Viraleze launch. After which, Starpharma plans to leverage its European registration to roll-out the product into other markets including Australia as quickly as possible.

As part of the go-to-market planning, qualitative and quantitative consumer research was undertaken in Europe during November.

The research from ~1,500 consumers confirmed that the product proposition for Viraleze is highly appealing. It also found that consumers would use the product in a wide range of settings. This includes in crowded areas such as shopping centres, elevators, workplaces, and public transport.

Starpharma’s CEO, Dr Jackie Fairley, commented: “We know from the positive market research that VIRALEZE has the ability to restore confidence and encourage people to resume everyday professional and recreational activities. Our market research also shows that the compelling features and convenience of VIRALEZE are highly appealing to consumers.”

“The distribution challenges of COVID-19 vaccines are well documented including the timing of wide-spread availability and adoption. Even after a vaccine becomes widely available, social distancing, PPE and other measures will continue to be important and VIRALEZE complements other prevention strategies, including vaccines. In November, the World Health Organisation stated that someone died every 17 seconds from COVID-19 in Europe. It is with the greatest urgency that Starpharma is working to make this product ready for market as quickly as possible in 1Q CY2021,” she added.

More reading

• Why the Starpharma (ASX:SPL) share price is racing higher 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 Starpharma Holdings Limited. The Motley Fool Australia has recommended Starpharma Holdings 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 Michael Hill International Ltd (ASX: MHJ) share price surged up 11% at market open today following the company’s positive trading update this morning.

Like most brick and mortar reliant retailers, Michael Hill’s shares were smashed during the COVID-19-driven market rout earlier this year, falling 69% from late January through to mid-April.

Since the 8 April low, shares have rocketed 161% higher. However, that’s still not quite enough to recover the losses from earlier in the year, with the share price down 14% year-to-date.

In comparison, the broader S&P/ASX 200 Index (ASX: XJO) is up 2% since 2 January.

What does Michael Hill do?

Founded by Sir Michael Hill in 1979, Michael Hill International is a specialist retail jewellery chain, headquartered in Brisbane.

The company sells jewellery and related services. It operates 289 stores in Australia, New Zealand and Canada. The group derives its prime revenue from Australia.

What’s driving the Michael Hill share price up?

In this morning’s interim trading update for the 22-week period ending 29 November, Michael Hill reported growth in both same store sales and gross margin.

Same store sales increased 7.9% compared to the same 22-week period last year, while same store sales in October and November were up 8.5% year-on-year.

The company reported a significant rise in sales across all of its markets. And in a trend mirrored by most ASX retail shares, it reported a huge lift in online sales, up 110% compared to the same 22-week period in 2019.

Noting 14 of its Canadian stores are temporarily shuttered due to virus control measures, Michael Hill cautioned that it is still concerned potential new virus outbreaks and lower instore foot traffic could impact its first half earnings.

Still, the company forecasts it will likely deliver earnings before income and tax (EBIT) in the first half of the 2021 financial year “materially exceeding” the prior year half one result of $31.6 million.

Commenting on the trading update, Michael Hill’s CEO Daniel Bracken said:

Across all channels and segments, the company has delivered strong results for October and November, continuing on the solid growth in sales and margin from the first quarter. In addition to this impressive top line performance, the company continues its unwavering focus on costs, and has worked diligently to deliver strong improvements in its cash and balance sheet position.

Bracken added that “the two weeks of trade leading up to Christmas are critical” for the company, and it’s keeping a close eye on evolving COVID-19 restrictions in Canada.

The Michael Hill share price has since retreated slightly to 58 cents, up 7.4%, at the time of writing.

More reading

• 5 things to watch on the ASX 200 on Thursday
• ASX 200 up again on Wednesday
• Cluey (ASX:CLU) share price jumps 12% after IPO before fading
• Citigroup downgrades these ASX mining stocks after a big rally
• The Esports Mogul (ASX:ESH) share price down 5% on mobile update

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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Billions of dollars in mining and energy projects could be put on hold if the government upholds the recommendation of a parliamentary inquiry into Rio Tinto Limited‘s (ASX: RIO) destruction of the Juukan Gorge caves cultural heritage site.

In one of seven recommendations put forward by the inquiry, the issuing of new approvals for projects that damage indigenous heritage in Western Australia could be put under indefinite moratorium.

At the time of writing, the Rio Tinto share price has edged 0.77% lower to $114.78.

What’s the background?

In May this year, Rio Tinto blasted the 46,000-year-old rock shelters at Juukan Gorge in Western Australia’s Pilbara region as part of the expansion of its Brockman 4 mine. This was despite warnings of the site’s cultural significance.

The gorge is known primarily for a cave that was the only inland site in Australia to show signs of continuous human occupation for over 46,000 years, including through the last ice age.

Rio Tinto has apologised, saying that an internal review has ascribed the mistake to a series of flaws in its systems. These include failures in the sharing of information and a lack of engagement with the indigenous people of the area.

In September, it was announced that chief executive Jean-Sebastien Jacques and other Rio executives would resign over the issue.

Parliamentary inquiry

A parliamentary inquiry has since been established to investigate everything from Rio Tinto’s corporate behaviour to the adequacy of state and Commonwealth heritage laws.

The inquiry has made seven recommendations in an interim report released yesterday. One of these recommendations is for Rio Tinto to pay compensation to the indigenous people and traditional owners of the Juukan site.

The inquiry also recommended Rio Tinto work to reconstruct the ancient structure, and called for a moratorium of all mining in the area. It further recommended Rio Tinto review its internal procedures in managing indigenous heritage matters.

Labor senator Pat Dodson, member of the joint parliamentary committee, said the destruction of the caves was one of the worst disasters “that has ever happened in our country”.

Rival miner Fortescue Metals Group Limited (ASX: FMG) is also embroiled in this issue and has been upsetting the traditional owners of Juukan. This comes after the company sought to increase its tenure on part of the area that Rio had vowed to temporarily leave undisturbed. 

More reading

• Rio Tinto (ASX:RIO) share price flat on lithium project update
• The Fortescue (ASX:FMG) share price has doubled in 2020: Too late to invest?
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• Why the Fortescue (ASX:FMG) share price hit a record high today

Motley Fool contributor Eddy Sunarto 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 PWR Holdings Ltd (ASX: PWH) share price is down 0.97% at open today after a company update on its expected performance to finish off the calendar year.

At the time of writing, the PWR share price is trading at $5.10.

Market update

PWR Holdings produces performance products for the motorsports and automotive industry. Management advised the company had seen strong trading conditions from the months October and November. And with the end of the quarter just weeks away, PWR Holdings is forecasting continued growth.

For the period ending 31 December, PWR Holdings anticipates earnings before interest, tax, depreciation and amortisation (EBITDA) to be in the range of $10 million to $11.5 million. This represents an increase of more than 30% on the prior corresponding period of $7.6 million achieved.

In addition, the state government awarded the company a ‘Made in Queensland’ grant of $1.2 million. The donation recognises PWR Holdings’ efforts in leading the market in aluminium powder for 3D printers.

The company also successfully completed the relocation of its offices in the United Kingdom to Silverstone. This was undertaken to ensure PWR is situated close within its customers and other industry leading suppliers.

PWR Holdings revealed it has a healthy cash balance of $12 million on hand, after repaying $5 million in loans drawn out during COVID-19. In addition, the company has available debt facilities of more than $15 million, and a unutilised asset finance provision of $7.5 million.

What did management say?

PWR Holdings managing director Kees Weel, welcomed the company’s resilient performance, saying:

We have taken prudent, proactive measures to maintain PWR’s strong balance sheet and solid working capital position.

About the PWR Holdings share price

The PWR Holdings share price reached an all-time high this week of $5.28. After falling to a 52-week low of $2.50 in March, investors have seen its shares rise above 100%. The PWR Holdings share price is up 9% from the start of the year.

More reading

• Evolution Mining (ASX:EVN) share price tumbles lower despite Crush Creek acquisition
• How to get free Airbnb (NASDAQ:ABNB) shares
• Rio Tinto (ASX:RIO) share price flat on lithium project update
• Why the McPherson’s (ASX:MCP) share price is sinking lower again
• Saracen (ASX:SAR) and Northern Star (ASX:NST) shares on watch after merger update

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has recommended PWR HLDING 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 Evolution Mining Ltd (ASX: EVN) share price has come under pressure on Thursday morning after a pullback in the gold price offset the release of a positive announcement.

At the time of writing, the gold miner’s shares are down almost 4% to $4.92.

What did Evolution announce?

This morning Evolution announced the acquisition of a 100% interest in the Crush Creek project which is located 30km southeast of its Mt Carlton Operation in Queensland.

This follows its entry into an earn-in agreement with Basin Gold in September 2019. That agreement meant Evolution could earn a 70% interest in the project by funding $7 million of exploration expenditure.

With that now achieved, management has exercised its option to acquire the remaining 30% of the project from Basin Gold for a cash payment of $4.5 million.

Basin Gold will retain a 10% net profit interest on any gold production in excess of 100,000 ounces.

Why Crush Creek?

According to the release, Crush Creek hosts low sulphidation epithermal gold mineralisation which Evolution believes has significant potential to provide mine life extensions at Mt Carlton.

Evolution’s Vice President Discovery and Business Development, Glen Masterman, commented: “Drilling at Crush Creek has returned promising results and reinforces our belief that mineralisation we are delineating has the potential to extend mine life at Mt Carlton.”

Drilling under Evolution management of the project has focused on understanding and expanding the mineralisation at the BV7 site along with testing the Delta area for a new discovery. Management revealed that encouraging results have been received from BV7 as well as from the Delta, The Kink, and Gamma prospects.

Drilling is continuing at these prospects during the December quarter focusing on the high-grade plunge to the north of BV7. In addition, follow up drilling continues at The Kink and Gamma prospects. More drilling updates are expected be released in the coming quarters.

More reading

• 5 things to watch on the ASX 200 on Wednesday
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• 5 things to watch on the ASX 200 on Friday
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Tuesday

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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An Australian share trading platform is offering free shares in Airbnb Inc (NASDAQ: ABNB), which is listing Thursday night AEDT.

Online broker Stake has given out a referral code — ‘Airbnb’ — that allows new users of the platform to receive a free Airbnb stock to the value of US$75.

The company’s initial public offering (IPO) price is in the range of US$56 to US$60.

This is in addition to Stake’s usual sign-up offer of a free share of Nike Inc (NYSE: NKE), GoPro Inc (NASDAQ: GPRO) or Dropbox Inc (NASDAQ: DBX).

The Motley Fool has contacted Stake for comment.

The catch is that users will have to submit proof they have used Airbnb as a host or a guest in order to receive the free stock.

Airbnb’s public listing has been highly anticipated for years. It reportedly tried to list earlier this year but the COVID-19 pandemic killed off that attempt.

Now, after sacking a quarter of its employees during the height of the virus downturn, it’s back with a vengeance.

So much so that it hiked up its IPO price from a range of US$44 to US$50 due to investor demand.

“Even at a higher price, Airbnb will see a lot of demand from IPO investors, and shareholders are hopeful that the stock will jump out of the gate as well,” wrote The Motley Fool US’s Dan Caplinger.

“That’s not surprising for a company as well known as Airbnb, and it’ll be interesting to see whether $56 to $60 per share turns out to be a huge bargain for IPO stock buyers.”

Why is Airbnb called Airbnb?

Airbnb started as an online listing in 2007 to rent out the co-founders’ air mattress in their San Francisco flat.

“I learn there’s a design conference coming to town, and all the hotels are sold out. And I’ve always believed that turning fear into fun is the gift of creativity,” Airbnb co-founder and chief product officer Joe Gebbia recalled in a 2016 TED talk.

Three guests booked to stay on their timber floor.

“They loved it, and so did we. I swear, the ham and Swiss cheese omelets we made tasted totally different because we made them for our guests,” Gebbia said.

“We took them on adventures around the city, and when we said goodbye to the last guest, the door latch clicked, Brian and I just stared at each other. Did we just discover it was possible to make friends while also making rent?”

The answer was an overwhelming yes, and now their company is about to list with a market capitalisation of more than US$42 billion.

More reading

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• Why the McPherson’s (ASX:MCP) share price is sinking lower again
• Saracen (ASX:SAR) and Northern Star (ASX:NST) shares on watch after merger update
• Apple stock could surge 61% to $200, according to this analyst
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Tony Yoo 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 Nike. The Motley Fool Australia has recommended Nike. 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 Rio Tinto Limited (ASX: RIO) share price is trading flat on Thursday morning despite a couple of positive news items.

At the time of writing, the mining giant’s shares are fetching $115.44.

What’s new for Rio Tinto?

The first bit of positive news this morning is that the spot iron ore price has continued its ascent.

According to CommSec, overnight the spot iron ore price climbed a further 0.5% to hit US$150.75 a tonne.

This means Rio Tinto’s iron ore operations are currently generating significant free cash flow, which bodes well for dividends.

What else is new?

Also of note for the mining giant’s shareholders is the release of an announcement relating to its Jadar operation in western Serbia.

That announcement reveals that Rio Tinto has declared its maiden ore reserve at the 100% owned lithium-borates project.

According to the release, the mineral resource comprises 55.2 Mt of indicated resource at 1.68% lithium oxide (Li2O) and 17.9% Boron trioxide (B2O3) with an additional 84.1 Mt of inferred resource at 1.84% Li2O and 12.6% B2O3.

This follows pre-feasibility studies which have shown that the Jadar project has the potential to produce both battery grade lithium carbonate and boric acid.

Management notes that the deposit is located on the doorstep of the European Union, one of the fastest growing electric vehicle (EV) markets in the world, and has the potential to provide lithium products into the EV value chain for decades.

It also points out that boric acid is a key raw material for advanced glass and fertiliser products and would be integrated with and complementary to Rio Tinto’s established position in this market.

In addition, the scale and high grade nature of the Jadar mineralisation provides the potential for a long life operation. One of which will be in the first quartile of the industry cost curve for both products.

What’s next?

The company revealed that the project moved into feasibility study at the end of July 2020. This was with an investment of almost $200 million on a scope that includes detailed engineering, land acquisition, workforce, and supply preparation for construction, permitting, and the early infrastructure development.

The feasibility study is expected to be complete at the end of 2021 and, if approved, construction could take up to four years.

More reading

• Citigroup downgrades these ASX mining stocks after a big rally
• ASX mining shares boosted today after broker upgrades
• Iron ore exports unlikely to slow down amid Australia–China trade tension: experts
• Why ASX iron ore stocks are set to rally today
• Are ASX stocks about to get an earnings upgrade boost in the new year?

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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The McPherson’s Ltd (ASX: MCP) share price is dropping lower again on Thursday.

At the time of writing, the health, wellness, and beauty products company’s shares are down 6.5% to $1.17.

This means the McPherson’s share price is now down over 65% from its 52-week high of $3.40.

What did McPherson’s announce?

This morning the company announced that its Chief Executive Officer and Managing Director, Laurie McAllister, has resigned with immediate effect.

This follows a dreadful year for McPherson’s which has seen the company’s performance and share price deteriorate materially.

What happened this year?

During the first quarter of FY 2021, the company recorded a decent 4% lift in sales to $49.7 million.

However, it appears as though it tried to take advantage of the incredible demand for hand sanitiser at the height of the pandemic and this ultimately backfired.

While McPherson’s reported an 84% lift in underlying profit before tax to $2.9 million, this excludes a hefty $5.7 million non-recurring full provision for the write down of its hand sanitiser inventory.

Management advised that delays in the supply of hand sanitiser products led to a customer cancelling the majority of its orders. This left it with a significant quantity of product.

Since then, the strong demand has dissipated and the supply base for such products has become much more competitive. As a result, McPherson’s has been left holding excess quantities of hand sanitiser inventory.

Unfortunately, it went from bad to worse from there. At the start of December, the company revealed that its Chinese Singles’ Day sales fell well short of target.

Once again, this left its China joint venture partner, Access Brands Management (ABM), with higher than forecast inventory levels at the end of November.

As a result of this, the company was forced to withdraw its guidance.

What’s next?

McPherson’s has revealed that Non-Executive Director, Grant Peck, will replace Mr McAllister on an interim basis, effective today. It feels this will provide continuity and aid the transition to a new permanent CEO and Managing Director.

This continuity will be very important given that it only completed the acquisition of the Global Therapeutics business from Blackmores Limited (ASX: BKL) on 1 December.

The board advised that it will now initiate the necessary steps to identify and appoint a permanent CEO and Managing Director and will make a further announcement in due course.

More reading

• Why Adore Beauty, Bank of Queensland, Bega Cheese, & McPherson’s are dropping lower
• Why is the McPherson’s (ASX:MCP) share price dropping 35% today?
• Why these All Ords shares have been smashed this month

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores 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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