Austal Limited (ASX: ASB) shares will be on watch today following the release of the company’s first-half results. At market close yesterday, the Austal share price finished the day 2.7% higher at $2.30.

Let’s take a closer look and see how the shipbuilder’s performance has tracked for the period.

Why will the Austal share price be in focus?

The Austal share price could be on the move today as investors digest the company’s latest results.

According to its release, Austal delivered a robust performance despite continuing to navigate through COVID-19 challenges.

For the six months ending 31 December 2020, Austal reported total group revenue of $840.3 million. While this reflected a 19% fall from the prior corresponding period, the company noted revenue was impacted by a number of factors. These included unfavourable currency exchange movements, a reduction in United States commercial shipbuilding and vessel support activities, as well as longer than expected commissioning of Australian ships.

However, in further news that could impact the Austal share price, earnings before interest and tax (EBIT) rose to $70.5 million, a lift of 17.6% over the H1 FY20 term. The growth was attributed to improved shipbuilding margins in both geographical segments and lower overhead corporate costs.

Net profit after tax (NPAT) surged to $52.4 million, representing a 29% jump on the comparable period.

Austal closed the calendar year with cash in the bank of $371.9 million, and $111.7 million of gross debt. Overall, this leaves the company with a net cash position of $260.2 million, slightly below FY20’s amount of $272.4 million.

The board declared an unfranked interim dividend of 4 cents per share to be paid to eligible shareholders on 22 April 2021. This is a 33% increase over the H1 FY20 interim dividend. Also worth noting is the fact the board has decided not to continue with its dividend reinvestment plan (DRP), holding off until further notice.

CEO commentary

Austal CEO Paddy Gregg touched on the group’s performance, saying:

The strong interim financial results were driven by excellent shipbuilding operating margins in both of our USA and Australasia operations, which flowed through to an enhanced bottom line.

This highlights the success of the pragmatic initiatives Austal has implemented to increase our efficiency, reduce our cost base and set the business up for sustained profitability.

Outlook

Looking ahead, Austal maintained its FY21 EBIT guidance of $125 million and revenue of $1.65 billion. The company noted, though, based on the appreciating Australian dollar against the United States dollar, it may be forced to reassess EBIT and revenue guidance.

Austal share price snapshot

Over the last 12 months, the Austal share price has fallen 37% due to the pandemic heavily weighing down its operations. Just last week, Austal shares sank to a multi-year low of $1.98 following an update on an investigation by United States authorities.

The Austal share price is a long way from its pre-COVID levels of around the $4 mark.

More reading

• ASX 200 goes higher, Afterpay sinks, Adbri impresses
• Why the Austal (ASX:ASB) share price got torpedoed today
• Why Afterpay, Austal, Perenti, & SEEK shares are tumbling lower
• ASX 200 flat: SEEK CEO exits, Afterpay sold off, BOQ surges higher

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. 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 AMP Ltd (ASX: AMP) share price could attract some excitement this morning after it announced a potential joint venture (JV) with Ares Management Corp Class A (NYSE: ARES).

Ares left AMP standing at the alter when it snubbed the opportunity to buy all of AMP. But the ASX company is desperate for some lovin’ as the AMP share price tumbled when Ares walked away.

The two parties may have found a new way forward after they signed a non-binding Heads of Agreement to form a $2.25 billion JV.

AMP’s share price to get $1.6bn boost from JV

The JV will hold AMP Capital’s private markets businesses. This includes infrastructure equity and infrastructure debt, real estate and other minority investments.

If the deal goes through, AMP stands to get a $1.55 billion cash injection before associated costs. Not a bad second prize as the cash represents a third of AMP’s current market capitalisation.

Under the proposed deal, Ares will own 60% of the JV and will have management control. AMP believes this is the best way forward after it failed to find another suitor to lob a full takeover of the embattled wealth manager.

Is AMP’s joint venture with Ares good news?

The rational is that AMP will get a big cash boost, and could potentially fund another special dividend or capital return. AMP’s private markets business is also likely to grow faster under the stewardship of Ares due to its global reach and the extra economies of scale.

Ares had US$197 billion ($250 billion) in assets under management at the end of December 2020. Of that, it managed US$18.3 billion in infrastructure and real estate AUM with over 100 investment professionals in North America and Europe.

AMP shareholders will be able to benefit from the expected accelerated growth in the JV though AMP’s 40% ownership.

Other ways to unlock value in AMP’s share price

Both parties will work exclusively to sign a binding deal over the next 30-days and AMP is free to explore options for its public markets assets that aren’t included in the JV.

One should think there is some value there. AMP Capital’s public markets business made a modest but positive contribution to the group’s net profit in FY20.

These assets include the Multi-Asset Group, which is being restructured and absorbed into AMP Australia, and the Global Equities and Fixed Income (“GEFI”) business. AMP is open to selling the latter two or forming partnerships.

Glass half-full outlook

“We expect [the JV] would strengthen the business and significantly accelerate our strategy to grow private markets, while de-risking our international expansion plans,” said AMP’s chair Debra Hazelton.

“The transaction will enable AMP to increase focus on the transformation of our wealth management business in Australia, drive the continued growth of AMP Bank and New Zealand wealth management and benefit from driving further efficiency.”

AMP shareholders like myself will be keeping our fingers crossed!

More reading

• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• These were the worst performing ASX 200 shares last week
• ASX 200 drops slightly, Telstra rises, AMP sinks
• ASX 200 down 0.1%: Telstra update impresses, AMP sinks, Newcrest jumps
• Why the AMP (ASX:AMP) share price is tumbling 9% today

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

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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It has certainly been a rough start to the year for Xero Limited (ASX: XRO) shares. After rocketing 84% higher in 2020, the Xero share price has been steadily drifting back to earth so far in 2021.

In fact, Xero shares have slumped by more than 19% in just two months. This is almost two-thirds as much as the company fell by during the COVID-19 induced panic which bottomed out on 23 March last year.

What’s dragging down the Xero share price?

The timing of the slump in the Xero share price does seem odd. Vaccines are being rolled out at a rapid rate and new cases of COVID-19 in the United Kingdom and United States have been plunging. In fact, we have never been closer to an end to the pandemic. Surely this would be good news for Xero’s small business customers?

With no material company announcements in 2021, one possible factor dragging down the Xero share price is the prospect of rising interest rates. As economic activity starts to pick up again, we are likely to see some of the emergency measures used to keep the economic heart beating being eased. This means we could be waving good-bye to record low interest rates.

Rising interest rates can be bad news for a company’s share price because future earnings get discounted at a higher rate, reducing its fundamental value.

Another possibility for the drift lower is simply that the Xero share price got caught up with the post-COVID tech rally and the market got ahead of itself. This was amplified when Xero was added to the MSCI Global Standard Index late last year, boosting interest in the company.

Should you be worried?

Neither factor, interest rate worries or shifting investor sentiment, is really related to how Xero’s business is performing. Is Xero likely to see lower subscriber growth because of COVID-19? Absolutely, but that is not new information.

In the six months to September 2020, Xero announced it had slashed spending on advertising and marketing in response to the pandemic which would slow growth. Even then, Xero added 168,000 new subscribers during the period and grew free cash flow from NZ$4.8 million to NZ$54.3 million.

It’s worth remembering too that in the five years to 31 March 2020 Xero was able to grow revenue at a compound annual growth rate of 36%! Xero’s full-year FY21 results are due to be released on 13 May 2021 and investors will be paying keen attention to how the company plans to revive growth again for the years ahead.

More reading

• 3 explosive ASX growth shares to buy next week
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• 2 exciting ASX tech shares to buy
• 3 of the best ASX shares you can buy right now
• 3 reasons why the Xero (ASX:XRO) share price could be a buy

Motley Fool contributor Regan Pearson owns shares of Xero. You can follow him on Twitter @Regan_Invests. The Motley Fool Australia owns shares of Xero. 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.

Apple Inc (NASDAQ: AAPL)’s stock price has more than tripled over the past three years, silencing the bears who claimed its best days were over. Its iPhone business remained stable, newer hardware devices like the Apple Watch and AirPods attracted more consumers, and its prisoner-taking services ecosystem locked in over 600 million paid subscribers.

The next few years could also be promising for Apple. Its first family of 5G iPhones could spark lots of upgrades this year, its streaming services should gain more subscribers, and it could gradually expand into the AR and automotive markets. With nearly $200 billion in cash and marketable securities in the bank, Apple still has plenty of ways to expand via new investments and acquisitions.

As a long-term Apple investor, I still believe Apple’s best days are ahead. But I’m also well aware that three big challenges could generate unpredictable headwinds for the tech giant in the near future.

1. Apple’s App Store battles

A growing list of companies, including Epic Games, Spotify (NYSE: SPOT), and Rakuten, are claiming Apple’s 30% cut of its App Store revenue is anti-competitive.

Last March, Spotify and Rakuten both filed antitrust complaints against Apple in Europe. Spotify claims Apple’s cut of its in-app revenue is too high, and that those fees give Apple Music an unfair pricing advantage on iOS devices. Rakuten, one of Japan’s top e-commerce companies, also claimed Apple’s fees made it impossible for its own e-books subsidiary, Kobo, to compete against Apple Books.

Last August, Apple booted Epic’s Fortnite from the App Store after it bypassed Apple’s payments system with direct in-app payments. Epic and Apple subsequently sued each other, and the case could drag on for years — but a ruling in Epic’s favour could allow more developers to circumvent Apple’s payment system.

Meanwhile, Microsoft (NASDAQ: MSFT), Alphabet‘s (NASDAQ: GOOG) (NASDAQ: GOOGL) Google, and other companies want to launch their cloud gaming platforms on iOS as single stand-alone apps that can play large libraries of games.

Apple wants these platforms to offer their games in individually wrapped installations so they can be monitored and monetized, and this byzantine structure could spark new antitrust complaints against the company. All these issues could throttle the growth of the company’s App Store, which accounts for a large portion of the revenue for Apple’s services segment — which generated 17% of Apple’s overall revenue in fiscal 2020.

2. Apple’s war against online advertisers

Apple’s upcoming iOS 14 update will allow users to opt out of data-tracking features in apps. That change, which Apple claims will protect users’ personal data, could cause serious problems for companies like Facebook (NASDAQ: FB) and Alphabet’s Google, which both generate most of their revenue from targeted ads.

Facebook, which claimed the change could reduce its Audience Network ad revenue by over 50%, is reportedly preparing to file an antitrust suit against Apple over the planned update.

Google and other online advertisers could eventually follow Facebook’s lead and try to loosen Apple’s iron grip on its walled garden. It’s unclear if they’ll succeed, but those clashes could cause antitrust regulators to take a much closer look at Apple’s control over iOS apps.

3. The rise of the Chromebooks

Google’s Chromebooks, which are manufactured both internally and by third-party partners, outsold Apple’s MacBooks in full-year shipments for the first time ever in 2020, according to IDC.

That might not seem like a major threat, since Chromebooks usually target lower-end users while MacBooks aim higher. Chromebooks are generally considered more of a threat to low-end Windows PCs rather than MacBooks, especially in the education market.

However, Google’s high-end Pixelbook, which was initially launched in 2017, also highlighted the potential of high-end Chromebooks. Several other PC makers, including Asus and Acer, have already followed Google’s lead with higher-end Chromebooks, which could pull more affluent users away from MacBooks.

The growth of the Chromebook market — along with Microsoft’s ongoing launches of new Surface tablet devices — could impact Apple’s Mac business, which accounted for 10% of its sales last year. Moreover, new variations of the Chromebook, including detachable tablets that run Android apps, could also affect Apple’s iPad business, which still generated 9% of its sales last year.

The key takeaways

Apple’s core business is strong, but investors shouldn’t overlook these threats. The intensifying clashes over in-app payments, data-tracking, and targeted ads could spark tougher antitrust moves against Apple, while Google and Microsoft both remain formidable rivals in the ever-shifting hardware market.

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

More reading

• 5G is barely here, but Apple is already planning for 6G
• Microsoft’s partnership with European news publishers threatens Facebook and Alphabet
• Fortnite maker Epic Games files antitrust lawsuit against Apple in the EU
• TSMC could soon make Apple’s AR dreams a reality
• Why investors should look beyond the ASX 200 to US share markets

Leo Sun has no position in any of the stocks mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Facebook, Microsoft, and Spotify Technology. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Apple, and Facebook. 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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As well as providing a generous passive income, dividend shares could deliver impressive capital growth in a stock market recovery.

Their high yields could become increasingly appealing to income investors with limited options among other mainstream assets. Furthermore, the low valuations of many income shares could mean they offer good value for money and significant scope for gains over the long run.

With a large proportion of the stock market’s past total returns having been generated from the reinvestment of dividends, buying income shares could be a sound means of outperforming the index.

The increasing popularity of dividend shares

While dividend shares have always been a means of obtaining a passive income, today they could prove to be the best option by some distance for many investors. That’s not only because many dividend stocks have high yields, but also because income returns available elsewhere are relatively low.

The loose monetary policies pursued over the past 10+ years, as well as falling interest rates across major economies following the 2020 market crash, mean that the returns on cash and bonds are extremely disappointing. For many people, they are too low to even consider when it comes to obtaining an income from their capital. As such, they may be pushed towards dividend stocks in order to generate a worthwhile passive income.

This situation may mean that demand for dividend shares increases over the coming years. Certainly, interest rates will rise at some point in future. However, that could be many months, or even many years, away. The result of this could be rising demand for income shares that pushes their prices higher.

Total return potential

As mentioned, many income shares appear to offer good value for money at the present time. Since the 2020 market crash, many investors have focused on growth stocks, rather than dividend shares. This could mean there is scope for large capital gains from a portfolio of income shares that enables them to outperform the wider stock market.

The historic returns of indexes such as the FTSE 100 Index (FTSE: UKX) shows that a large proportion of total returns have been derived from the reinvestment of dividends. As such, investors who do not need, or desire, an income in the short run could buy income stocks and reinvest the shareholder returns received. This may enable them to earn a relatively high return in the coming years.

Clearly, it is important to diversify across a wide range of dividend shares. Although many of them are solid businesses with sound financial positions, the uncertain outlook for the economy may hold back their performances in the short run. However, buying a range of them could produce higher returns, as well as lower risks, to benefit from a long-term stock market rally.

More reading

• Where next for the Afterpay (ASX:APT) share price?
• 3 ways A2 Milk (ASX:A2M) is planning a share price recovery
• Here’s why the People Infrastructure (ASX:PPE) share price is one to watch today
• Reece (ASX:REH) share price on watch after solid half year results
• 2 top ASX dividend shares with massive yields

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 Afterpay Ltd (ASX: APT) share price has been an exceptionally strong performer over the last 12 months.

Since this time last year, the payments company’s shares have doubled in value.

Where next for the Afterpay share price?

According to a leading broker, the Afterpay share price may have peaked for the time being.

A note out of Goldman Sachs this morning, reveals that its analysts have looked through its half year results and retained their neutral rating.

And while the broker has lifted its price target by 27% to $127.60, this is still a touch below where the Afterpay share price last traded.

What did Goldman say?

Goldman Sachs was pleased with its first half performance and particularly its repeat use metric. It commented:

“APT’s 1H21 result was solid as: frequency of use driving strong unit economics and helping offset opex investment required as it prepares to scale further with an EU launch in 4Q FY21 and Asia still being reviewed (though no new detail was provided).

“We believe customer growth and frequency of use remain the two most important metrics for APT given they indicate product/market fit with consumers, credit quality of its book and are likely indicative of its future pipeline with merchants. We introduce two new earnings streams into our forecasts: cross-border FX and transaction savings account in North America (interchange fee stream). APT also announced a A$1.5bn convertible note to fund increasing its interest in APT US Inc. from 80% to ~93%.”

“Our 12m TP moves to A$127.60 (+27% from A$99.90 previously) implying a potential return of -5%. No change to Neutral rating.”

What about other brokers?

Thankfully for shareholders, there are other brokers that see upside for the Afterpay share price over the next 12 months.

One of those is Credit Suisse. This morning the broker retained its outperform rating and lifted its price target on its shares to $145.00. 

This could mean the gains are not necessarily over for the Afterpay share price just yet.

More reading

• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises 0.8%, A2 Milk sinks, Zip drops
• ASX 200 up 0.85%: A2 Milk & Zip shares hammered, Afterpay to raise $1.25bn
• Afterpay (ASX:APT) delivers more explosive growth and launches $1.25bn notes offering
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 A2 Milk Company Ltd (ASX: A2M) share price was sent 16% lower yesterday after the company reported its FY21 half-year result.

Investors didn’t like what they saw in the numbers and the guidance.

FY21 half-year report highlights

There were plenty of double digit declines.

Total revenue was down 16% to NZ$677.4 million and earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 32.2% to NZ$178.5 million. The net profit after tax (NPAT) fell by 35% to NZ$120 million.  

Management explained that challenges result from COVID-19 disruptions are still being felt in the daigou channel which is also affecting the cross-border e-commerce channel.

A2 Milk has said that it has responded to challenges by appropriately managing discretionary costs while continuing important capability investment in people, technology and infrastructure.

Revenue for FY21 is now expected to be in the order of NZ$1.4 billion and the EBITDA margin is expected to be between 24% to 26%. This outlook assumes actions taken to re-activate the daigou channel are successful and deliver significant improvement quarter on quarter.

How is A2 Milk going to rescue its profit and share price?

The A2 Milk share price has fallen by more than half since early July 2020, it has dropped by 56%.

A2 Milk outlined three areas where it sees profit growth can occur:

1: Re-activate the daigou channel

A2 Milk said that the daigou channel has been disrupted, particularly due to the prolonged stage 4 lockdown in Victoria, with a contraction being beyond its previous expectations. These events, combined with subdued online pricing and channel inventory unwinding, have resulted in daigou being slower to re-enter the market to promote the brand. While there was some improvement in the channel towards the end of the period, the recovery was not as strong as had previously been expected.

The company is continuing to focus on re-activating this channel and is confident that it remains an attractive and strategically important channel for distribution penetration and new user recruitment.

A2 Milk is aiming to re-activate the channel with three strategies. The first is rebalancing inventory levels and improving traceability through the channel. The second is providing temporary support to daigou. Finally, it’s working with corporate daigou to drive innovation in distribution.

The company said that given the role of this channel, including in new user recruitment in an increasingly competitive market, some continued pressure on consumer demand is expected.

Management may believe that this initiative is the most important one to save the A2 Milk share price and profit.

2: Local Chinese growth

Sales in A2 China label infant nutrition of $213.1 million was achieved, an increase of 45.2% on the prior corresponding period.

The company’s 12-month rolling market value share in Chinese mother and baby stores (MBS) was 2.4% at the end of December, increasing by 0.7 percentage points compared to the prior corresponding period. Distribution increased to 22,000 stores, up from 18,300 in the prior corresponding period.

A2 Milk said that this performance is pleasing given the strategic importance and size of the channel and the increasing competitive intensity. There will continue to be an opportunity to gain market share given the strong resonance the brand has with consumers, according to management.

3: Expand in other geographies

Daigou and Chinese sales are not the only way that A2 Milk can grow.

A2 Milk says that the USA is an important market, it continues to evaluate product and distribution opportunities to significantly increase the scale and profitability of the business. It grew USA revenue by 22.3% to $34.2 million. An improved EBITDA result was also delivered, with a significantly reduced loss of $11.6 million, representing an $18.4 million improvement on the prior corresponding period. Its distribution has grown to 22,300 stores, up 2,000 from June 2020.

Canada growth is also expected. In March it entered into an exclusive licensing agreement with Agrifoods International for the production, sales and marketing of liquid milk under the A2 Milk brand in the Canadian market. Products were first launched in July 2020, initially focusing on Western Canada with subsequent distribution expansion.

More reading

• ASX 200 rises 0.8%, A2 Milk sinks, Zip drops
• Why a2 Milk, Service Stream, TPG, & Zip shares are tumbling lower
• Why the a2 Milk (ASX:A2M) share price is crashing 20% to a multi-year low
• ASX 200 up 0.85%: A2 Milk & Zip shares hammered, Afterpay to raise $1.25bn
• a2 Milk (ASX:A2M) share price on watch after downgrading guidance again

Motley Fool contributor Tristan Harrison 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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The People Infrastructure Ltd (ASX: PPE) share price certainly will be one to watch on Friday.

After the market close on Thursday, the workforce solutions company released its half year results and announced the surprise exit of its CEO.

How did People Infrastructure perform in the first half?

For the six months ended 31 December, the company posted a 3.1% increase in revenue to $201 million. However, it is worth noting that $13.8 million of its revenue came from JobKeeper payments. Excluding this, revenue would have been down almost 4% to $187.1 million.

This ultimately led to the company reporting a 51.5% increase in normalised net profit after tax (before amortisation) to $14.8 million.

The People Infrastructure board has elected to continue paying dividends despite relying on government support during the half. It declared a 4.5 cents per share fully franked interim dividend, which is up 12.5% on the prior corresponding period.

At the end of the period, People Infrastructure had a net cash balance of $7.2 million.

CEO exit

Possibly weighing on the People Infrastructure share price today is news that the company has accepted the resignation of David Cuda as CEO.

Mr Cuda has resigned for personal reasons and will be leaving the company next month. He was only appointed permanent CEO in September 2020 after taking on the role in an interim capacity in January.

Former Managing Director, Declan Sherman, will be stepping into the role of CEO in an interim capacity while recruitment is conducted for a replacement.

Guidance

People Infrastructure remains cautiously optimistic on the outlook for the remainder of the financial year. It expects to achieve normalised EBITDA between $14 million and $16 million for the second half.

This will bring its full year normalised EBITDA to between $35 million and $37 million, which represents annual growth of 36% to 40%.

Incoming interim CEO, Declan Sherman, commented: “Looking forward into the second half of FY21, whilst we are aware that the economic and operational uncertainty relating to Covid-19 may still have implications for our clients, we note the general stability that is returning to the sectors which we serve and we continue to focus on driving growth in niches where we can demonstrate a clear point of difference in our product and services offering.”

“We continue to look at both the opportunity to grow organically into new sectors as well as use our strong balance sheet for acquisition opportunities that would expedite that growth.”

More reading

• 3 compelling ASX shares to buy in February
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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 People Infrastructure Ltd. The Motley Fool Australia has recommended People Infrastructure 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 Reece Ltd (ASX: REH) share price will be one to watch on Friday.

This follows the release of the plumbing parts company’s half year results after the market close yesterday.

How did Reece perform in the first half?

For the six months ended 31 December, Reece reported a 4% increase in sales revenue to $3,074 million.

This was driven by a 7% lift in Australia and New Zealand sales revenue to $1,564 million and a 1% increase in US sales revenue to $1,509 million. The latter was up 7% in constant currency.

Things were even better for its earnings thanks to margin expansion. The company reported a 12% increase in normalised earnings before interest, tax, depreciation and amortisation (EBITDA) to $349 million. And on the bottom line, net profit after tax increased 17% to $123 million.

However, due to dilution caused by its $647 million balance-sheet strengthening equity raise at the height of the pandemic, earnings per share only grew 2% to 19 cents.

At the end of the period, Reece had a significant cash balance of $953.8 million.

However, despite this cash balance and its profit growth, Reece declared a fully franked interim 6 cents per share dividend. This was flat on the prior corresponding period.

Management commentary

Reece’s CEO, Peter Wilson, commented: “Through a period of continuing uncertainty, we have remained focused on supporting the essential work of our customers, and we’re proud to have delivered another record result.”

“Our response to the dual health and economic crises has ensured that we’ve protected our business today while also accelerating our strategy for long-term growth. The Reece Group strategy, business model, and people have proven resilient through this period and we are in a strong position to capitalise on future growth opportunities.”

No guidance or trading update was provided by the company.

How does this compare to expectations?

Analysts at Morgans were forecasting underlying EBITDA to be up 1% to $315.6 million. So, this result appears to have smashed its forecast. This could bode well for the Reece share price today.

More reading

• 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 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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Positively, for income investors in this low interest rate environment, there are a good number of ASX dividend shares offering generous yields.

For example, two ASX dividend yields with particularly big yields are named below. Here’s why they are rated as buys:

Fortescue Metals Group Limited (ASX: FMG)

This mining giant recently released its half year results and revealed a significant increase in all key metrics. This was driven by its low costs, record shipments, and the sky high iron ore price. In respect to the latter, Fortescue reported an average realised price of US$114 per dry metric tonne for its iron ore. This was a massive 42.5% increase on the prior corresponding period.

This underpinned a 44% increase in revenue to US$9,335 million, a 66% lift in net profit after tax to US$4,084 million, and a 93.4% jump in its interim dividend to a fully franked A$1.47 per share.

Analysts at Macquarie were impressed with its result. As a result, they reaffirmed their outperform rating and $26.50 price target. The broker is forecasting a full year dividend of A$2.78 per share. Based on the current Fortescue shares price, this will be a fully franked 11% yield.

Super Retail Group Ltd (ASX: SUL)

Like Fortescue, this retailer recently released a very strong half year result of its own. This was driven by solid growth across the company and its online business.

The company behind retail brands BCF, Macpac, Rebel, and Super Cheap Auto delivered a 23% increase in sales to $1.78 billion and a 139% increase in underlying net profit after tax to $177.1 million. In light of its strong performance, the Super Retail board declared a fully franked interim dividend of 33 cents per share.

Goldman Sachs is a fan of the company. In response to its results, the broker reiterated its buy rating and lifted its price target to $15.00.

Goldman is forecasting a dividend of ~81 cents per share in FY 2021 (including a special dividend). Based on the current Super Retail share price, this equates to a fully franked 7.1% yield.

More reading

• The Fortescue (ASX:FMG) share price is up 13% in February, time to buy?
• 2 high quality ASX dividend shares to buy now
• Bell Potter tips the Fortescue (ASX: FMG) share price to go lower 
• Goldman Sachs upgraded these ASX 200 shares after outstanding results 
• 4 ASX hydrogen shares powering forward in 2021

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