The Cimic Group Ltd (ASX: CIM) share price fell hard after the opening bell, down 14% at the time of writing.

This comes after the company released its financial results for the full year ending 31 December.

What full year financial results did Cimic report?

In this morning’s announcement, Cimic Group reported statutory net profit after tax (NPAT) of $620 million for the full 2020 financial year. That compares to a loss of $1.4 billion for the 2019 financial year.

Underlying NPAT came in at $601 million, down from $800 million in FY 2019. This was adjusted for the company’s sale of Thiess, Gorgon, and other one-offs.

The $372 million in proforma underlying NPAT fell from $597 million the previous financial year. This reflects the underlying adjustment for Thiess as a 50% joint venture.

Cimic reported revenue of $11.4 billion, down from $14.7 billion in 2019. The company said that COVID-19 had caused delays in gaining new projects, resulting in lower revenues across both its domestic and international activities.

The construction, mining, services, and engineering company ended 2020 with liquidity of $4.2 billion and a net cash position of $190 million. It reported that it had work on hand of $30.1 billion, or the equivalent to approximately 2 years of revenue.

Comments from the CEO

Addressing the results, Cimic Group CEO, Juan Santamaria said:

While the pandemic had a bearing on revenues and the award of new projects during 2020, we have a strong level of work in hand of $30.1 billion, providing approximately two years’ worth of work and a positive outlook for the future.

The Thiess transaction has delivered additional capital to pursue future growth opportunities and enables us to retain a strategic 50% interest in the mining business, whilst also strengthening our balance sheet and reducing debt.

Santamaria said the company’s strong liquidity and net cash position, supported by the Thiess transaction, enabled it to declare a final dividend of 60 cents per share. That works out to a payout ration of 62% of Cimic’s 2H 2020 NPAT.

Looking ahead, Cimic is targeting healthy profit growth for the 2021 financial year. It offered FY21 NPAT guidance in the range of $400–430 million. Those figures are up 8–16% from the 2020 results.

Cimic Group share price snapshot

The Cimic share price, like many ASX shares, was hammered during the COVID market panic last year. Shares plunged 63% from 22 January through to their 19 March lows. Since that low, the Cimic share price has rebounded 78%.

With today’s intraday loss taken into account, the Cimic share price is down 7% so far in 2021. By comparison the S&P/ASX 200 Index (ASX: XJO) is up 2.5%.

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

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The Northern Star Resources Ltd (ASX: NST) share price opened more than 4% higher this morning following release of the company’s half-year results. At the time of writing, the Northern Star share price is trading up $3.95% at $12.37.

Northern Star Resources is a gold production and exploration company with a resource base located in Australia and North America’s gold regions.

Record profits and interim dividend boost Northern Star share price

The company reported that it achieved record profits, cash flow, and interim dividend in the 6 months leading to 31 December 2020.

Northern Star’s net profit after tax shot up 46% compared to the previous corresponding period (pcp) hitting $184.5 million.

The interim dividend soared 27% to 9.5 cents a share, fully franked.

The gold miner’s group earnings before interest, tax, depreciation and amortisation (EBITDA) also posted record gains to reach $472.2 million. That’s a 47% leap compared to the previous corresponding period.

Commenting on Northern Star’s EBITDA, executive chair Bill Beament said:

The record EBITDA of A$472m demonstrates that our growth plan is delivering superior results.

This result came despite investing A$108m in exploration and expansionary capital and directing 39 per cent of our gold sales into hedges, which meant revenue was over A$100m lower than at spot prices.

The company further posted an underlying free cash flow in the first half of FY21 of $226 million, a significant increase from the pcp, which was $116 million.

Northern Star merger with Saracen positioned to boost production

On 12 February 2021, the Northern Star merger with Saracen Mineral Holdings Limited (ASX: SAR) will be implemented. 

Regarding its first-half results, Northern Star reported that sales stemmed from 480,431oz of gold production.

The company is expecting a stronger second half following the merger with Saracen. Production guidance for the full year is 940,000oz to 1.06 million oz.

Northern Star believes that the Saracen merger positions the company on a “clear pathway to an annual production rate of 2 million oz”.

The Northern Star share price has dropped more than 10% over the past 12-month period.

More reading

• Why Computershare, IAG, Northern Star, & PointsBet shares are pushing higher
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Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) is on course to bounce back from yesterday’s decline. In late morning trade, the benchmark index is up 0.25% to 6,839.5 points.

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

Computershare Ltd (ASX: CPU)

The Computershare price is 2% higher at $14.62. This follows the release of its first half results after the market close on Tuesday. The administration services company reported a 3.2% decline in management revenue to $1.1 billion and a 25% decline in net profit after tax to $117.8 million. This was ahead of expectations and led to Computershare upgrading its guidance for the full year.

Insurance Australia Group Ltd (ASX: IAG)

The Insurance Australia Group share price is up 4.5% to $5.28. Investors have been buying the insurance giant’s shares following the release of a better than expected half year result. It reported a 3.8% increase in gross written premiums (GWP) to $6,188 million for the first half. And thanks to lower motor claims, the company delivered a sizeable 33.1% increase in insurance profit to $667 million. And while it posted a statutory loss after tax of $460 million, this didn’t stop the board from declaring a 7 cents per share interim dividend.

Northern Star Resources Ltd (ASX: NST)

The Northern Star share price is up 3% to $12.26 following the release of its half year results. For the six months ended 31 December, the gold miner delivered a record underlying half year net profit after tax of $194.4 million. This was up 63% from the prior corresponding period. This was driven by gold sales coming in at the upper end of its guidance range at 480,431 ounces.

PointsBet Holdings Ltd (ASX: PBH)

The PointsBet share price is up 4.5% to $16.64. Investors have been buying the sports betting company’s shares after it announced a multi-year strategic partnership with the NHL. The agreement will see the ice hockey league name PointsBet as an “Official Sports Betting Partner.” As part of the partnership, PointsBet receives rights to use NHL marks and logos, as well as a variety of NHL sponsorship and promotional opportunities for its brand across various linear, digital, and social media assets.

More reading

• Here’s why the Northern Star (ASX:NST) share price is climbing today
• Here’s why the PointsBet (ASX:PBH) share price is surging 6% higher
• Why the Insurance Australia Group (ASX:IAG) share price is charging higher
• Computershare (ASX:CPU) share price on watch after better than expected half year result
• 5 things to watch on the ASX 200 on Wednesday

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 Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings 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 Vulcan Energy Resources Ltd (ASX: VUL) share price is pushing higher again on Wednesday.

In morning trade the clean-lithium company’s shares were up as much as 6.5% to $9.00.

At the time of writing, the Vulcan share price has eased back a touch but is still up 2.5% to $8.66.

Why is the Vulcan share price pushing higher?

Investors have been buying Vulcan shares today after it announced a bolt-on acquisition.

According to the release, the company has signed a binding agreement to acquire 100% of geothermal subsurface consultancy company GeoThermal Engineering.

The release explains that GeoThermal Engineering has a highly credentialed, world-leading scientific team with over a century of combined expertise in sub-surface development of geothermal projects. This includes from exploration to production drilling.

Management explained that the acquisition is part of its plans to accelerate its Zero Carbon Lithium project in Germany.

This project will use the company’s Zero Carbon Lithium process to produce both renewable geothermal energy, and lithium hydroxide, from Europe’s largest lithium resource.

What will it cost?

The acquisition will cost Vulcan a single euro. The company notes that the sole shareholder of GeoThermal Engineering is Dr. Horst Kreuter, who is the Executive Director of Vulcan.

Geothermal Engineering owes a debt of approximately 140,000 euros to Dr Kreuter plus a nominal amount of interest. It also has further debt of 135,000 euros owed to external parties.

Completion of the acquisition is subject to the completion of due diligence to Vulcan’s sole discretion and satisfaction.

Vulcan’s Managing Director, Dr. Francis Wedin, commented: “By acquiring GeoT, we are welcoming decades of experience of German deep geothermal sub-surface project development into the Vulcan team.”

“GeoT has exceptional expertise in the geology and geochemistry of the Upper Rhine Valley geothermal brine. Our motivations are fully aligned: to decarbonise heat and power in Europe with geothermal development in the Upper Rhine Valley, and in doing so to co-produce Zero Carbon Lithium for the European electric vehicle market. We expect our larger, bolstered development team to accelerate the development of our globally unique project,” he concluded.

Following today’s gain, the Vulcan share price is now up 212% since the start of 2021.

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• Why Alliance Aviation, REA Group, SEEK, & Vulcan shares are charging higher
• Here’s why the Vulcan Energy (ASX:VUL) share price is storming 14% higher
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• Why the Vulcan Energy (ASX:VUL) share price stormed 186% higher in January

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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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.

To put it plainly, the coronavirus pandemic boosted most of Amazon‘s (NASDAQ: AMZN) operations. Social distancing orders placed added value on the services it provided and to the company’s credit it capitalized on the situation quite effectively.

The pandemic will not be permanent, and life will at some point slowly return to a more normal reality. Where will Amazon’s business be when this happens? Here we will explore Amazon’s prospects one year from today.

Thriving financially

Amazon fully took advantage of the environment we found ourselves in last year — and it shows in the company’s financial success. In its most recent quarter (ended Dec. 31, 2020) the company eclipsed $100 billion in sales for the first time, with revenue coming in at $125.6 billion — up 44% year over year on a truly massive base.

Its trailing-12-month operating cash flow soared 72% year over year to $66.1 billion with free cash flow over the same period rising 20.1% despite heavy investments in logistics and a historic hiring spree.

The outperformance does make some sense considering the year our world has just endured. Government mandates forced many brick-and-mortar retail rivals to temporarily close or restrict capacity, which boosted Amazon’s gigantic e-commerce presence by limiting consumer selection.

Furthermore, the pandemic accelerated society’s digital transformation. Considering this, one could have expected its Amazon Web Services (AWS) segment to enjoy strong demand just like its commerce business did. After all, Microsoft‘s Azure — its closest competitor — realized a slight ramping in growth quarter over quarter during the same period. It posted 48% growth for Azure versus the prior-year’s period.

However, AWS did not realize a demand boost. Its year-over-year growth of 29% was the same as the previous quarter despite favorable macro tailwinds; this potentially points to the segment continuing to mature and reach its potential. With AWS boasting far better profit margins than its e-commerce business, this is concerning and there is little guarantee it will be able to turn around.

The ebbing of COVID-19

While we don’t know exactly when the pandemic will finally come to end, help is certainly arriving. Over the last several weeks, millions of Americans have received their COVID-19 vaccines, and cases continue to precipitously drop in correlation with this trend. To help supply chains even more, Johnson & Johnson just submitted an Emergency Use Authorization application for its COVID-19 inoculation.

What would this all mean for Amazon?

The return of brick-and-mortar competition should allow stores to more effectively compete with Amazon. This is not to say Amazon’s growth will halt here — far from it. The company has been delivering expansion and shareholder returns for decades and that will not likely change as e-commerce as a whole continues to quickly grow. Still, it does likely mean growth will revert to pre-pandemic levels.

From an AWS perspective, fading social distancing orders could theoretically lead to the return of in-person meeting and collaboration which could be a small headwind there. With AWS’ growth already slowing during the heat of the pandemic, a return to normalcy would be great for the world as a whole but perhaps not as great for Amazon. The company’s somewhat lofty price to earnings (P/E) ratio of 80.2 makes slowing growth in its two primary areas of business troubling.

Proceed with caution 

For years (decades really) Amazon has reliably delivered for investors. While its 2020 was undeniably admirable, a return to normalcy would remove some of the need for Amazon’s products. Investors certainly will not be burned by owning this iconic behemoth, but I do think there are better places to invest your funds.

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

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, 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 Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. 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.

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Brambles Limited (ASX: BXB) shares are edging higher this morning following the company’s latest ASX announcement. At the time of writing, the Brambles share price has climbed 0.75% higher to $10.76.

Why is the Brambles share price climbing today?

The Brambles share price is on the move in early trade after the company announced a merger of its Kegstar business with MicroStar. Kegstar is Brambles’ keg rental business while MicroStar is a leading United States beer keg solutions provider.

Brambles’ business is a participant in the global beer keg rental sector operating across Australia, New Zealand, the United Kingdom, Ireland, the Netherlands and the US. MicroStar will look to capitalise on synergies in the similar ‘pay per fill’ business models used by both companies.

Brambles will hold an approximate 15% stake in the merged entity with the remaining 85% retained by MicroStar’s existing shareholders. These include Freeman Spogli, a growth-focused private equity firm based out of Los Angeles, USA.

MicroStar is set to purchase Kegstar at an enterprise value of US$52.2 million and issue shares in MicroStar to Brambles. The proposed merger remains subject to foreign investment approval in Australia and New Zealand with expectations this will be finalised by June 2021.

The coronavirus pandemic “significantly impacted” the Kegstar business as reported by Brambles last year. The group’s FY2020 results noted a “slow recovery” in the Kegstar business due to widespread lockdowns and operational inefficiencies.

Whilst the Brambles share price is edging higher in early trade following the news, shares in the logistics group remain down around 16% over the last 12 months while the S&P/ASX 200 Index (ASX: XJO) is down 2.7% over the same period. 

Foolish takeaway

The Brambles share price is climbing higher this morning following the company’s merger announcement. The merger of the Kegstar and MicroStar businesses will create an even larger global keg rental operation.

Brambles will retain a 15% stake in the combined entity’s operations and recognise that as an investment on its books.

More reading

• Why the Crown (ASX:CWN) share price is tumbling lower today
• Why the Mineral Resource (ASX:MIN) share price will be in focus today
• Here’s why the PointsBet (ASX:PBH) share price is surging 6% higher
• Why the Insurance Australia Group (ASX:IAG) share price is charging higher
• Praemium (ASX:PPS) share price on watch after “transformational” period

Motley Fool contributor Ken Hall 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 Crown Resorts Ltd (ASX: CWN) share price has returned from its trading halt this morning and is tumbling lower.

At one stage, the casino and resorts operator’s shares dropped as much as 9% to $9.25.

The Crown share price has since recovered the majority of these declines and is currently down 3% to $9.82.

Why is the Crown share price under pressure?

Investors have been selling Crown shares following the release of the Commissioner’s report of the inquiry into the suitability of Crown Resorts holding the licence for Sydney’s Barangaroo casino.  

According to the release, Commissioner Patricia Bergin does not believe Crown is suitable to operate its new Sydney casino. Nor does the Commissioner feel Crown Resorts is suitable to be a close associate of the licensee.

Commissioner Bergin explained: “Any applicant for a casino licence with the attributes of Crown’s stark realities of facilitating money laundering, exposing staff to the risk of detention in a foreign jurisdiction and pursuing commercial relationships with individuals with connections to Triads and organised crime groups would not be confident of a positive outcome.”

“It is obvious that such attributes would render an applicant quite unsuitable to hold a casino licence in New South Wales. 23 These facts and the stark realities expressed so baldly may also suggest that it is obvious that the Licensee is not suitable to continue to give effect to the Barangaroo Licence and that Crown is not suitable to be a close associate of the Licensee,” she added.

However, the Commissioner has hopes that Crown could transform itself. This could be saving the Crown share price from a steeper drop today.

She commented: “If Crown is to survive this turmoil and convert itself into a company that can be regarded as a suitable person and achieve the same for the Licensee, there is little doubt that it could achieve a fresh start and emerge a very much stronger and better organisation.”

Directors resign

Two directors that came under fire during the inquiry were Guy Jalland and Michael Johnston.

The commissioner suggested that “if Mr Jalland and/or Mr Johnston remain as directors it will be necessary to have some additional protections from them because of their failures.”

That won’t be necessary, with both directors handing in their resignations today.

What’s next?

The final decision now lies with the Independent Liquor and Gaming Authority (ILGA). Though, it is widely accepted that the Authority will follow the recommendations of the Commissioner’s report.

In the meantime, the company advised that it is currently considering the Inquiry Report.

Crown also advised that will work with the New South Wales ILGA “in relation to the findings and recommendations of the Inquiry Report as contemplated by the regulatory agreements between Crown, ILGA and the State of New South Wales.”

More reading

• ASX 200 drops 0.9%, Crown not suitable for Sydney casino, Macquarie rises
• Crown (ASX:CWN) shares on watch after being found unsuitable to operate Sydney casino
• ASX 200 rises, Worley dumped, Mesoblast rises
• Why the Crown (ASX:CWN) share price could be hit harder than others today
• 5 things to watch on the ASX 200 next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts 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 Mineral Resources Limited (ASX: MIN) share price is lifting this morning. This comes after the company announced its half-year results for the 2021 financial year.

In early trading today, the Mineral Resources share price is up almost 2% at $37.67.

How did Mineral Resources perform?

Mineral Resources delivered an exceptional six months of trading despite disruptive first-half trading conditions.

For the period ending 31 December, the company reported total revenue of $1,530.5 million. This reflected an increase of 55% on the previous $986.7 million attained in first-half of FY20.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) soared to $763 million, a jump of 131% on the previous corresponding period (pcp).

Both metrics were driven by mining services growth from the Yilgarn Hub and increased iron ore exports to existing customers. Record iron ore sales stood at 7.9 million tonnes at the Yilgarn Hub. The rise of the iron ore spot price also contributed to the result, moving 33% higher to US$126 per dry tonne.

The strong iron ore result partially offset the reduced revenues received from its lithium counterpart mines. This was due to its lithium operations receiving a lower price for spodumene concentrate. The average realised price of the battery-making ingredient came to $459 per dry tonne, a reduction of $230 per dry tonne – 50% on the same time last year.

Mineral Resources’ net profit after tax (NPAT) surged to $430 million, up 233% over the same time last year.

Operating cash flow improved to $516 million when excluding the tax paid from the sale of its 60% interest in Wodgina Lithium Plant. This reflected a $303 million increase over the pcp.

Diluted earnings per share (EPS) fell to 275.27 cents against the same time last year, which saw EPS at 470.06 cents.

Mineral Resources declared a cash balance of $1.1 billion on hand, down $193 million. However, undrawn debt facilities of $364 million give the company room to support its future business development activities.

The board declared a fully franked interim dividend of 100 cents to be paid to eligible shareholders on 9 March 2021. This is a 335% jump compared to the previous interim dividend (23 cents paid to shareholders).

Words from the managing director

Mineral Resources managing director Chris Ellison welcomed the results, saying:

Despite the backdrop of COVID-19, Mineral Resources has delivered outstanding operational and financial performance in the December half, demonstrating the strength of our business and the ability to maximise returns when commodities like iron ore are doing well. It also vindicates our decision to invest heavily across our iron ore business during the past few years.

Likewise, Mt Marion has outperformed during this period to deliver record production volumes at lower costs, a remarkable achievement for a spodumene operation in what has been a challenging market. Pleasingly, we are seeing some positive signs in the lithium market and Mineral Resources is well positioned to benefit from this commodity’s upturn as the world renews its focus on green energy and demands greater volumes of high-quality spodumene concentrate.

About the Mineral Resources share price

Over the past 12 months, the Mineral Resources share price has gained almost 120% for patient investors. Its shares hit a low of $6.94 in March, before zooming to reach an all-time high of $41.19 last month.

Based on the current share price, Mineral Resources commands a market capitalisation of close to $7 billion.

More reading

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

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The PointsBet Holdings Ltd (ASX: PBH) share price is surging higher on Wednesday morning.

At the time of writing, the sports betting company’s shares are up 6% to $16.84.

Why is the PointsBet share price surging higher?

Investors have been buying PointsBet shares following the announcement of another major agreement.

According to the release, PointsBet has signed a multi-year strategic partnership with the National Hockey League (NHL). This partnership sees the NHL name PointsBet as an “Official Sports Betting Partner.”

The agreement between the two companies spans across both the United States and Australia. As part of the partnership, PointsBet receives rights to use NHL marks and logos, as well as a variety of NHL sponsorship and promotional opportunities for its brand across various linear, digital, and social media assets.

Management notes that it also provides PointsBet with the ability to integrate content into live NHL game broadcasts across NHL media partners. This includes NBC Sports, NBC Sports Regional Networks, Altitude TV, and other potential future linear alignments.

In fact, PointsBet, NBC Sports, and the NHL have already begun installing these integrations for the 2020-21 NHL season. This includes the incorporation of PointsBet odds, data, and insights to complement the pregame, in-game, and postgame broadcasts.

NHL’s Chief Business Officer and Senior Executive Vice President, Keith Wachtel, spoke very positively about the agreement.

He said: “As the sports betting landscape evolves at a rapid pace, we continue to develop unique, strategic alliances within the sports gaming industry. Our partnership with PointsBet brings to life our collaboration with our valued media partners and we look forward to enhancing our fan engagement opportunities in concert with both PointsBet and NBC. We are proud to welcome PointsBet to the NHL family.”

As part of the partnership, the company has agreed to issue the NHL 43,106 PointsBet shares. This represents ~A$687,000 based on its last close price.

These shares will be in a holding lock, released in equal proportions after 12, 24, and 36 months respectively.

“Thrilled”

PointsBet’s US CEO, Johnny Aitken, commented: “PointsBet is thrilled to become an official sports betting partner of the National Hockey League. The NHL’s on-ice product provides fans with captivating, nonstop action – it is a privilege to join forces with the NHL and its forward-thinking team, complementing that action with PointsBet’s sports betting product.”

“We are excited to further elevate fan engagement via offering the most markets in the world for each NHL game, including our exclusive PointsBetting product, and enhance TV and digital integrations with mutual partners like NBC Sports,” he concluded.

Following today’s gain, the PointsBet share price is now up 42% year to date.

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• Why these ASX shares just stormed to 52-week highs or better
• Why Megaport, Netwealth, PointsBet, & Zip shares are racing higher

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The Insurance Australia Group Ltd (ASX: IAG) share price has been a positive performer on Wednesday.

At the time of writing, the insurance giant’s shares are up 3.5% to $5.23.

How did Insurance Australia perform in the first half?

For the six months ended 31 December, the company reported a 3.8% increase in gross written premiums (GWP) to $6,188 million.

And thanks to lower levels of claims, Insurance Australia Group delivered a sizeable 33.1% increase in insurance profit to $667 million. Management estimates that it experienced a ~$100 million benefit from lower motor claim frequency, largely from lockdowns in Victoria.

The company’s cash earnings also grew strongly. The company reported a 21.6% increase in cash earnings over the prior corresponding period to $462 million.

However, on a statutory basis, the company recorded a loss after tax of $460 million. This was due largely to an adverse ruling in respect to business interruption claims, which led to Insurance Australia making a $1.15 billion pre-tax charge.

In light of this, the company’s board cut its interim dividend by 30% to a fully franked 7 cents per share.

How does this compare to expectations?

The market was expecting the company to report a sizeable loss because of the pre-announced business interruption claims provision, so that was largely already factored into the Insurance Australia share price.

However, one positive surprise was the company’s dividend. Morgans and Goldman Sachs, for example, were not expecting the company to declare an interim dividend.

Outlook

Looking ahead, the company has set itself a target of expanding both its cash return on equity (ROE) and reported margin over the coming years. It is targeting a cash ROE of 12% to 13% and a reported margin of 15% to 17%.

This compares to FY 2020’s cash ROE of 11.5% and reported margin of 15.1%. It hopes this will allow it to pay sustainable dividends to shareholders.

Its margin target is ahead of Goldman Sachs’ forecast of 14.6% in FY 2023. This could be another reason why the Insurance Australia share price is outperforming today.

Management commentary

Insurance Australia’s Managing Director and Chief Executive Officer, Nick Hawkins, was pleased with the half.

He commented: “We have seen a strong underlying performance across our businesses over the last six months and we will build on this performance as we sharpen our focus to deliver a stronger, more resilient IAG.”

The Chief Executive also spoke about the elephant in the room – the $1.15 billion pre-tax charge for business interruption claims.

He said: “Our business interruption policies were never intended to cover pandemics. However, following the Supreme Court of NSW Court of Appeal decision on the COVID-19 business interruption test case, we conducted a detailed review to determine our potential exposure, and took action to strengthen our balance sheet.”

Looking ahead, Mr Hawkins appears positive on the future.

He explained: “Over the past few months, we have put in place measures which I believe will further strengthen the business. We’ve restructured the business, splitting our Australia Division into Direct Insurance Australia and Intermediated Insurance Australia to better align our brands to our customers and to bring a stronger focus to our commercial and personal intermediated businesses.”

“We are acting decisively to address the issues facing our business. We are working with the broader insurance industry to get clarity on how our business interruption policies should be interpreted in the context of COVID-19, and we continue to make progress on our customer remediation program.”

“And today we have outlined our strategy which will allow us to deliver IAG’s full potential over the next three to five years. At IAG we have a great history, strong foundations and a clear purpose. I’m excited about IAG’s future and our opportunity to make the world a safer place for more than 30 million Australians and New Zealanders,” he concluded.

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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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