The financial breakdown in 2008 left an indelible mark on the banking system and left global investment banks with tighter regulatory requirements.

The shortcomings exposed during the GFC included inadequacies in corporate governance and risk management practices for investment banking activities. Multinational banking group Macquarie Group Ltd (ASX: MQG) survived the financial crisis, but it was forced to look at its business model in view of stricter regulations globally in the years after the GFC. 

A shift to annuity style business

With a market capitalisation of around $49 billion, Macquarie Group is Australia’s fifth largest bank. It has a minuscule market share in the retail bank sector compared to the big four banks – Australia and New Zealand Banking GrpLtd (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd. (ASX: NAB), and Westpac Banking Corp (ASX: WBC).

The bulk of Macquarie’s earnings traditionally came from its trading desks and advisory fees – in FY14, they made up 68% of the group’s revenue – but from 2015, Macquarie began scaling up its annuity style businesses amid changing market conditions. Annuity style businesses refer to businesses that generate steady income with low risk. In Macquarie’s case, these are its asset management, asset finance and retail banking services, which produce recurring revenue year in, year out.

These annuity style businesses contributed less than 30% to the group earnings 10 years ago, but made up 63% of its net profit in FY20. The transformation to a more predictable earnings stream is one of the main reasons why Macquarie’s share price is much higher today (+300%) compared to October 2010.

As the group successfully navigated COVID-19 relatively unscathed, the Macquarie share price has returned to its pre-COVID levels of around $135. The banking group has proven its ability to grow its asset management business, which makes up 40% of its net profit according to Macquarie’s annual general meeting result in 2020.

The rise of renewable energy and infrastructure

Macquarie has focused on its less volatile asset management business to free up capital, protect its balance sheet and to comply with stricter regulatory requirements. This has changed the group’s business model from investment banking to a more balanced one.

In the asset management space, infrastructure and renewable energy are Macquarie’s 2 main growth drivers. In the near term, the annuity style businesses are expected to be hit by the timing in asset realisation due to the pandemic. This will impose some impediments on the asset sale process.

However, as a leading asset manager, the banking group’s asset management business has proven more defensive. Low interest rates support real asset values such as infrastructure, property, asset finance and commodities. The Reserve Bank of Australia (RBA) has kept the official interest rate at a record low of 0.25% since March. It continues to keep the discount rate low, resulting in an increase in the asset prices of Macquarie’s holdings.

What’s next

While investors may stay positive on the banking group’s medium-term prospects, Macquarie will not emerge completely scar free from COVID-19.

However, I think the banking group has made the right decision to focus on annuity style businesses and invest in the infrastructure and renewable energy sectors. As different countries recover from the pandemic-induced shutdown, Macquarie is well positioned to benefit from a more stable income stream while maintaining a healthy balance sheet.

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Motley Fool contributor Miles Wu has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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A prominent investment manager has called for the government to scrap plans to permanently allow ASX-listed companies to conduct virtual annual general meetings (AGMs).

To allow companies to conduct business under the threat of the COVID-19 pandemic, this year the federal government temporarily allowed AGMs to be conducted online.

This experiment had shown retail investors were “unfairly impacted”, according to Wilson Asset Management Chair, Geoff Wilson.

“Conducted in person, AGMs provide retail investors with the ability to directly and publicly ask questions of a company’s board of directors,” he said.

“The virtual alternative, as we have experienced this year, allows boards to omit, rephrase and reinterpret shareholders’ questions.”

Wilson said retail shareholders were very limited in ways they could get the attention of the board, and the AGM is the only practical way of communicating their concerns.

Wilson Asset Management operates a number of popular listed investment companies (LICs), such as WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX).

The Federal Treasury has currently opened public feedback on the proposal to permanently allow virtual AGMs. Comments must be submitted by Friday.

The timing of this submission period has also been criticised by investor groups, because it’s happening right in the middle of AGM season.

Wilson urged his clients to submit feedback opposing virtual AGMs.

“We encourage you to join us in arguing for AGM transparency and accountability to be upheld.”

Some institutional investors agreed with Wilson’s sentiments.

“Virtual AGMs are a necessity during the pandemic but they can diminish shareholders’ ability to ask questions and hold companies to account,” said Australian Council of Superannuation Investors Chief, Louise Davidson.

“In the AGMs we have already seen this year, it is apparent that – like a Zoom birthday party — something is definitely lost in the new format.”

Davidson, who represents 37 institutional investors that own an average of 10% of each ASX 200 company, criticised the timing.

“We are in the midst of the busiest period for company meetings and there are still hundreds of companies that are yet to test new technology and meeting procedure,” she said.

“We need time to ensure the lessons from the temporary provisions are appropriately incorporated into the permanent rules.”

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Motley Fool contributor Tony Yoo owns shares of WAM Capital Limited and WAM Research Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Northern Star Resources Ltd (ASX: NST) share price initially went against the broader ASX market sell-off this morning to move marginally higher. At the time of writing, however, the Northern Star share price has succumbed to wider market doldrums and edged 0.19% lower to $15.56.

This follows the release of the company’s first quarter update for FY21. Let’s take a look at how Northern Star performed over the last three months.

Strong quarter performance

For the period ending 30 September, Northern Star reported a robust result underpinned by its operations at Yandal and Pogo.

Gold sales increased to 227,532 ounces, which was in the upper end of the quarterly production guidance.

All-in costs came to $1,752 per ounce, with the average released selling price comfortably ahead at $2,493 per ounce. The wide margin resulted in free underlying cash flow of $132 million after the miner invested $42 million in growth and exploration activities.

Net profit after tax was estimated to be around $100 million, with a net mine cash flow of $170 million.

Annual production is forecast to increase by 40% to 1.25 million ounces over the next three years. In addition, capital costs are expected to fall by 10%, further generating free cash flow.

Corporate debt stood at $500 million, compared to the $700 million recorded at the end of prior quarter. The $200 million was repaid to reduce bank debt with a further $200 million spent on fully-franked shareholder dividends.

Northern Star closed the quarter with $470 million in cash, bullion and investments.

Management commentary

Northern Star Executive Chair, Mr Bill Beament commented on the outstanding performance at Yandal and Pogo as well as the Saracen Mineral Holdings Limited (ASX: SAR) joint venture. He said:

We are also delighted with the results at Pogo, which continued to improve on every metric as the benefits of the new bulk mining method and other changes we have introduced flow through. Costs for the quarter are 14.5 per cent lower than in FY20 and the project is generating strong free cashflow.

Our changes with Joint Venture partner Saracen at KCGM are also paying dividends, with costs beating guidance.

Mr Beament said the results at the Kalgoorlie operations reflected mine sequencing which resulted in lower grades and reduced overall tonnages. Gold sales were also reduced due to a planned roaster shutdown. However, this increased the inventory of concentrate, which will be poured in the current quarter.

Mr Beament continued:

Overall, we expect to increase production at the Kalgoorlie Operations each quarter this year and ultimately meet our full- year guidance there.

We have one of the strongest growth profiles in the global gold industry and we will achieve this with one of lowest capital intensities in the global gold industry. This combination enables us to deliver strong growth in production and free cashflow while maintaining our superior financial returns.

Mr Beament said Northern Star’s strong quarterly performance, combined with the excellent September quarterly results released by Saracen last week, provided further insight into the significant strengths of the proposed merged group. He lastly added:

Both companies have again demonstrated the tier-1 quality of our assets. Our combined production is growing to 2Moz a year by FY27 while most of our peers have a falling production profile. Our costs will continue to reduce and our combined scope for further organic growth in tier-1 locations is exceptional.

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Ramelius Resources Limited (ASX: RMS) share price is dropping lower on Tuesday despite delivering a strong first quarter production update.

At the time of writing, the gold miner’s shares are down 1.5% to $1.94.

What happened in the first quarter?

Ramelius performed ahead of expectations during the first quarter and delivered group gold production of 71,344 ounces. This compares to its guidance of 65,000 ounces to 70,000 ounces.

Also coming in ahead of guidance was its costs. Ramelius reported an all-in sustaining cost (AISC) of A$1,241 per ounce for the quarter. This compares to its guidance of A$1,250 per ounce to A$1,350 per ounce.

The key driver of this strong quarter was its Mt Magnet operation. It recorded production of 41,064 ounces at an AISC of A$1,138 per ounce. This was supported by its Edna May operation, which achieved production of 30,280 ounces at an AISC of A$1,387 per ounce.

Quarterly gold sales came in at 70,299 ounces, generating total revenue of A$163.3 million. This represents an average gold price of A$2,323 per ounce. As a comparison, the spot gold price is currently A$2,672.06 an ounce.

At the end of the period the company’s cash and gold balance stood at an all-time high of A$221.9 million, up from A$185.5 million three months earlier. This is after spending A$21.3 million on capital expenditure and exploration.

Net cash stood at A$205.7 million, with debt further reduced by A$8.1 million to just A$16.3 million.

Second quarter guidance.

More of the same is expected in the current quarter, with management guiding to group gold production of 67,000 ounces to 72,000 ounces. This comprises Mt Magnet production of 39,000 ounces and Edna May production of 30,500 ounces.

Costs are expected to be similar during the second quarter. Management expects to achieve its production with an AISC of A$1,200 per ounce to A$1,300 per ounce.

Capital expenditure will be higher. Management advised that capital and project development expenditure is projected to be approximately A$41.4 million.

This comprises A$15.4 million for the Eridanus cut back at Mt Magnet, $1.6 million for open pit development, A$17.6 million for Tampia (including modifications to Edna May plant), and $6.8 million for exploration.

Looking further ahead, management has retained its guidance for FY 2021. It continues to expect production of 260,000 ounces to 280,000 ounces at an AISC of A$1,230 per ounce to A$1,330 per ounce.

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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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In what is set to be the ASX market’s biggest initial public offering (IPO) this year, property developer Home Consortium Limited (ASX: HMC) has secured at least AU$300 million for its spinoff real estate investment trust (REIT) fund.

The new fund, called HomeCo Daily Needs REIT (proposed ticker ASX: HDN), will list on the ASX on 23 November. It is expected to offer 484 million units at $1.33 per unit, which brings its market cap at IPO of $644 million.

What assets are included in the HomeCo REIT fund?

As part of its effort to bring the fund to IPO, HomeCo has been actively acquiring retail shopping mall properties in NSW, Victoria, and Queensland.

Since July, it has purchased three shopping centres from Woolworths Group Ltd (ASX: WOW), along with assets in Western Sydney worth $220 million.  Overall, it has seeded the fund with 17 malls worth $844 million.

It’s worth noting that the fund has specifically chosen to anchor these properties with major supermarket tenants – hence the name ‘Daily Needs’. It specifically named supermarkets Woolworths and Coles Group Ltd (ASX: COL) as these anchor tenants.

The prospectus goes on to say that the portfolio has a 98 per cent occupancy rate, and 8.4  years average lease expiry. It was pitched to investors with 5.5% yield based on FY21 projections, with a total return story of 10% that includes capital gains. 

Is REIT a good investment?

REITs in general are a good diversifier for your overall portfolio. In addition to having a low price correlation with other shares in your portfolio, it can also give exposure to commercial properties in various geographical locations that you otherwise would not get from buying a single private dwelling. 

REITs usually offer relatively high dividends and potential long-term capital gains. Due to the nature of its underlying assets, REIT share prices are usually less volatile than other shares because properties tend to follow a more stable price movement and trajectory pattern.

So should I buy the HomeCo REIT shares?

In this ultralow interest rates environment, any investment that can provide a yield pick-up should definitely be considered. The HomeCo REIT’s expected dividend yield of 5.5% could boost your portfolio return, and provide a steady income above term deposit rates for many years to come.  

In Australia, there is no one single property market. Instead, the market is fragmented by states. The fact that the HomeCo REIT’s assets are spread over different states clearly offers good diversification. 

As the retail mall concept around the world is gradually pushed to the brink in the face of e-commerce competition, properties that are exposed to the non-discretionary retail sector will stand the most chance of surviving.

Non-discretionary assets refer to those investments which are not exposed to discretionary spending. Supermarkets like Coles and Woolworths are examples of the non-discretionary retail sector as they provide consumer staples. 

Although COVID-19 has generally put a lot of strain on the property sector, I think HomeCo has timed its purchases well and managed to pick up properties at good prices. Along with household names like Woolworths and Coles as anchor tenants, this REIT may just provide a good stable addition to your portfolio.

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Motley Fool contributor dsunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Pioneer Credit Ltd (ASX: PNC) share price has rocketed up another 11.5% up in opening trade today, following a major jump yesterday after the company released its Q1 update.

The news yesterday sent the financial service provider’s shares soaring to 60.5 cents, up 28.7% at market close. Let’s see what has sent the Pioneer share price flying.

Refinance process complete

Pioneer reported it completed the refinancing of its senior debt facility with The Carlye Group. The agreement will see Pioneer enter a new senior finance syndicate facility arranged by Nomura Australia Limited.

The funding solution will provide the company with the ability to further grow, purchasing new debt portfolios. The fully drawn facility is worth $169 million with an additional $20 million of undrawn funds available.

The company said it was currently exploring opportunities to reduce its cost of funding.

Trading update

For the period ending 30 September, Pioneer received $25.6 million in cash flow from customers. Cash outflows from operating activities stood at $16.9 million, which were in line with company expectations. A significant portion of these costs, $6.3 million, was paid to process the refinance of the senior debt facility.

Cash outflow from investing activities totalled $9.7 million, mostly comprising of purchased debt portfolios (PDP). PDP investment in the period was $10.6 million, with $1.1 million payable at the end of Q1.

Pioneer closed the quarter with a cash balance of $8.7 million.

COVID-19 response

As COVID-19 has caused challenging conditions, Pioneer advised it has provided a range of options to support its customers. Measures include payment holidays, interest rate deferrals, payment reductions and in some cases debt waivers.

Furthermore, Pioneer noted it has not credit-listed or defaulted any customer’s credit file during the pandemic.

The company was recently rated as +13 on a rolling 6-month net promoter score (NPS). NPS is a way to indicate customer support and resolve of financial outcomes.

Liquidations

Pioneer’s PDP liquidations were $25.3 million, making it a record amount over any previous first quarters.

The rate of liquidations corresponds to the solid growth in the payment arrangement portfolio, reaching $367 million for Q1. The company saw growth offset a reduction in the average payment instalments and lump sum settlements.

Customer portal

To increase consumer engagement, Pioneer is developing a digital platform that provides ease of the services offered. The portal accounts for 9% of customer payments across the business and is contributing to a reduction of operating costs.

The self-service platform continues to be refined, allowing greater management of a customer’s account and payment options.

Outlook

Pioneer revealed it has a broad range of PDP purchasing opportunities, which it will apply an appropriate risk approach. Lower priced debt portfolio sales are anticipated to continue in the future, reflecting a change in customer circumstances.

Pioneer did not provide a guidance for the remainder of FY21.

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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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It was an eerie day for the S&P/ASX 200 Index (ASX: XJO) yesterday as the market failed to hold its opening gains. The weakness that began to show itself took off overnight with the German DAX index slumping 3.7% while there were falls across the board for United States indices. This looks set to continue today with the ASX 200 opening lower this morning.

On a more positive note, while the Dow Jones Industrial Average Index (DJX: .DJI), Nasdaq Composite (NASDAQ: .IXIC) and S&P 500 Index (SP: .INX) all fell within the range of 1.6% to 2.3%, they all closed well above their lows in last night’s session. 

Soaring COVID-19 cases in the US and Europe 

The US, Russia and many European states have set new daily records for COVID-19 cases. There are now more than 43 million people that are reported to have been infected by the coronavirus globally and more than 1 million have died. 

But it is perhaps the trajectory of cases across Europe that is most worrisome. France, Spain, Italy, Germany and the United Kingdom all recorded seven-day rolling averages of approximately 5,000 cases back in April. This was seen as the peak and as lockdown measures kicked in, daily confirmed cases quickly headed back down. 

Today, these countries are all setting record increases, and not by a fraction, but many times over. France faces its biggest coronavirus challenge yet after posting more than 50,000 daily cases for the first time on Sunday. Other European countries have recorded daily cases within the range of 10,000 to 20,000, greatly overshadowing April cases. 

Governments have been reluctant to impose lockdown measures that curbed cases at the start of the year at the expense of the economy. But as new cases start to beat old records many times over, Europe is bracing for new lockdown measures. 

Italy’s prime minister on Sunday announced new lockdown measures for bars, restaurants and public gatherings in an attempt to avoid a full blown nationwide lockdown. The new decree discourages movements across regions, but no limitation will be introduced by law.

European countries have opted for less extreme lockdown measures than what we have experienced in Victoria. While there are pros and cons to both approaches, it will be interesting to see which practice will lead to better outcomes for Europe’s communities and economy. 

ASX 200 opens lower

The doom and gloom weighed on the economic outlook as global financial markets took a significant hit overnight. This is playing out on our own ASX this morning with the ASX 200 falling 0.82% in the first 15 minutes of trade.

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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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Evolution Mining Ltd (ASX: EVN) share price is dropping lower on Tuesday following the release of its first quarter production update.

At the time of writing, the gold miner’s shares are down 0.5% to $5.60.

How did Evolution perform in the first quarter?

For the three months ended September 30, Evolution’s group gold production came in at 170,021 ounces. This was 22% reduction on the prior quarter’s production of 218,104 ounces.

This comprises Cowal production of 51,774 ounces, Ernest Henry production of 24,569 ounces, Red Lake production of 26,638 ounces, Mungari production of 35,370 ounces, Mt Rawdon production of 20,024 ounces, and Mt Carlton production of 11,646 ounces.

Evolution’s production was achieved with an all-in sustaining cost (AISC) of A$1,198 per ounce, up from A$1,088 per ounce in the previous quarter.

Management notes that its AISC equates to US$857 per ounce, which places Evolution at the bottom of the cost curve amongst major and mid-tier global gold producers. All-in costs (AIC) came in at A$1,663 per ounce, resulting in an AIC margin of A$871 per ounce.

All operations generated positive net mine cashflow during the quarter, this led to the company delivering mine operating cash flow and net mine cash flow of A$272.3 million and A$183.4 million, respectively. Mine capital investment for the period was A$88.1 million, down from A$111.5 million in the prior quarter.

As a result of this, at the end of the period, Evolution had cash in the bank of A$369.7 million and bank debt of A$550 million.

Outlook.

No guidance was given for the remainder of FY 2021. However, management commented on a number of plans it has to boost future production.

This includes the board’s approval of the development of the Galway exploration decline. This will enable additional drilling to increase underground Ore Reserves and will also be used for future production.

Management notes that the 2,300 metre decline has received regulatory approval and is another important milestone in growing Cowal’s production to over 350,000 low cost ounces per annum.

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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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Bendigo and Adelaide Bank Ltd (ASX: BEN) share price is trading higher following the release of its first quarter update.

At the time of writing the regional bank’s shares are up 0.5% to $6.71.

How did Bendigo and Adelaide Bank perform in the first quarter?

Bendigo and Adelaide Bank has started FY 2021 strongly in respect to its lending.

According to the update, the bank achieved total lending growth of 11% and residential lending growth of 16.1% during the first quarter. Management notes that these are both well above system growth.

In addition to this, the company’s net interest margin (NIM) continues to be well managed, increasing one basis point since the end of the second half of FY 2020 to 2.3% for the first quarter.

Bendigo and Adelaide Bank’s Managing Director, Marnie Baker, commented: “In line with our strategy, we are focused on driving sustainable growth through active cost management, and we continue to target income growth to exceed cost growth this financial year.”

The company’s leader also revealed that the bank is well-placed to navigate the pandemic.

“Our sights are firmly fixed on achieving outcomes for all stakeholders and we are adequately provisioned to manage through the pandemic. Pleasingly, the number and balances of COVID-19 support packages have significantly reduced, including in Victoria, as the Bank continues to work individually with customers on repayment deferral arrangements,” she explained.

Customer accounts on deferral.

As of 16 October, Bendigo and Adelaide Bank had 6,797 customer accounts still on deferral. This is down a sizeable 69% from the peak on 31 May and down 63% since 31 August.

The value of the accounts where repayments have been deferred is ~$2.5 billion. Once again, this is down significantly from the peak, which was $6.9 billion in June.

Residential and consumer support packages total 4,408 accounts, down 74% since the peak in May. Whereas, Commercial support packages total 2,389 accounts, down 49% since peaking in July.

These numbers are expected to continue to reduce in coming months as repayment deferral periods expire and Melbourne reopens.

Marnie Baker commented: “It’s rewarding to see our personalised support has enabled more than two-thirds of these customers to get back on their feet and we are further encouraged by the Victorian Premier’s announcement to reopen Melbourne’s retail and hospitality industries from tomorrow.”

Though, the bank remains very supportive of those that are still in need of help.

“We are also committed to ensuring tailored arrangements are agreed with those customers still on repayment deferral arrangements prior to their deferral period ending, and that measures are in place to allow for a smooth transition and fair outcomes are achieved for customers and shareholders,” the managing director 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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The PointsBet Holdings Ltd (ASX: PBH) share price will be in focus this morning after the release of the sports betting company’s first quarter update.

How did PointsBet perform in the first quarter?

PointsBet was a very strong performer in the first quarter and recorded exceptional growth across all major metrics.

For the three months ended 30 September, the company reported turnover of $691.9 million, up 193% from the prior corresponding period.

The majority of PointsBet’s turnover continues to be generated in the Australian market. The Australian business reported a 221% increase in turnover to $527.7 million, which was supported by a 130% increase in US turnover to $164.2 million.

Growing at an even quicker rate was the company’s gross win metric, which lifted 282% to $70.4 million for the quarter. This comprises Australian gross win of $60.5 million and US gross win of $9.8 million. The net win metric also grew strongly, up 222% on the prior corresponding period to $38.1 million.

At the end of September, PointsBet had a total of 164,500 active clients, up 88% since this time last year. This comprises 124,700 Australian clients and 39,800 US clients. The latter was up 159% on the prior corresponding period.

Net cash used in operating activities was $10 million. Though, excluding movement in player cash accounts, net cash used in operating activities was $21.6 million. Management notes that its operating net cash outflows were driven by cost of sales ($19 million), non-capitalised staff costs ($6.4 million), marketing costs ($28.6 million) and administration and corporate costs ($5.8 million).

Despite these outflows, PointsBet finished the period with a hefty $436.5 million of corporate cash. A significant amount of this is held in US dollars.

Outlook.

While no firm guidance was given for the remainder of the financial year, management appears positive on its outlook.

It commented: “The Company recognises a structural change in the Australian online wagering market, including brand consolidation (BetEasy, previously the third largest brand in the Australian market merging with SportsBet during the quarter) and a shift from retail (venue) to online wagering. As a result, the Company is pursuing a strategy to increase Net Win growth and market share.”

Whereas in the United States, it notes that its NBC Sports deal aligns the company with a 2025 US$12 billion opportunity.

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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 Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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