The AMP Limited (ASX: AMP) share price is up this morning, following the resignation of 3 senior executives. Chair David Murray, CEO of AMP Capital Boe Pahari, and non-executive director John Fraser have all resigned from their positions following pressure from major shareholders.

AMP is embroiled in a storm over its internal culture, with media reporting allegations of sexual harassment and a culture of fear. 

Why the resignations? 

AMP has reported the resignations are in response to feedback by major shareholders regarding the appointment of Boe Pahari. Pahari was appointed as CEO of AMP Capital on 1 July 2020. The promotion was followed by widespread outrage by female employees of AMP, who called for the sacking of Pahari and cultural change across the business. Prior to his appointment, Barahi had been penalised $500,000 following a sexual harassment claim brought by a female subordinate who no longer works at the company

Harassment complaint

According to media reports, Pahari encouraged a culture of regular socialising and drinking at after work engagements. “If you didn’t go out with him you were ostracised in the business and in the office,” once source told the Australian Financial Review (AFR). “You are either in his good graces or his enemy; there is nothing in between,” said another.

According to the alleged victim of the 2017 harassment complaint, the executive said she made him look like a “limp dick” when she declined to use his credit card to buy clothes, and encouraged her to use Whatsapp to communicate to evade company scrutiny. An external investigation was conducted into the 2017 complaint, which resulted in the aforementioned settlement. 

CEO David Murray said:

The Board has made it clear that it has always taken the complaint against Mr Paharii seriously. My view remains that it was dealt with appropriately in 2017 and Mr Pahari was penalised accordingly. However, it is clear to me that, although there is considerable support for our strategy, some shareholders did not consider Mr Pahari’s promotion to AMP Capital CEO to be appropriate.

Pahari will resume work at his previous level with a focus on AMP Capital’s infrastructure business. 

Chair replaced 

As reports of the alleged harassment gained traction, shareholders took issue with Pahari’s promotion to one of the most powerful positions in AMP.

The AMP board is now dealing with the fallout of the decision to promote Pahari, with David Murray saying his resignation reflects his accountability as chair. He will be replaced by Debra Hazelton, who has some 30 years experience in financial services.

In light of Murray’s resignation, John Fraser also decided to resign as non-executive director. CEO Francesco De Ferrari will assume direct leadership for AMP Capital while a new head of the business is sought.  

More reading

• AMP to release sexual harassment details, won’t sack anyone
• Investors call for AMP Capital CEO’s head
• Why today is a great day to add to your ASX share portfolio
• ASX 200 drops 0.7%, Telstra falls 7.7%
• Earnings: AMP share price soars despite $107 million drop in profits

Motley Fool contributor Kate O’Brien 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 Bubs Australia Ltd (ASX: BUB) share price is pushing higher on Monday after the release of an update.

At the time of writing the infant formula and baby food company’s shares are up almost 4% to 96 cents.

What did Bubs announce?

Investors have been buying Bubs shares this morning after it announced a memorandum of understanding (MOU) with joint venture partner Beingmate.

According to the release, the MOU gives Bubs the opportunity to acquire an ownership interest in one of Beingmate’s infant formula manufacturing facilities in Beihai China and obtain Beingmate’s support in securing a State Administration for Market Regulation (SAMR) brand slot.

The ultimate objective of this will be producing Bubs China label goat milk infant formula at one of Beingmate’s registered facilities with 100% Bubs Australian goat milk.

The company advised that a finished SAMR approved China label product, tailored to the Chinese market, will be sold by Bubs to the Beingmate joint venture company – Bubs Brand Management Shanghai.

The joint venture company, of which Bubs owns a 49% interest, will continue to distribute the Bubs China label product into China’s general trade channel, under the terms of the existing agreement.

SAMR difficulties.

The company appears to believe this is the best chance that it will have of joining A2 Milk Company Ltd (ASX: A2M) in the China market.

It notes that since April 2019, 92 product applications have been successful in obtaining SAMR registration. Of these, 77 are manufactured in China.

The remaining 15 products that are manufactured outside of China, 9 are Chinese owned brands manufactured in France. The only international brand to achieve certification during this period was Wyeth for 6 products that are manufactured in Singapore.

Beingmate currently has 51 infant formula products under 17 brands successfully registered by SAMR and being sold nationwide in China.

In light of this, Bubs intends to withdraw its existing SAMR brand applications previously made by Deloraine, and resubmit differentiated super-premium formulations targeting consumers in tier-one cities.

Invaluable support.

Bubs Founder and CEO, Kristy Carr, commented: “We are highly confident this step up in our collaboration with Beingmate, one of the largest Chinese owned enterprises in China’s Infant Nutrition industry, who is also our Joint Venture distribution partner, coupled with their extensive capability to manufacture locally in China, will provide invaluable support in securing our SAMR brand registration.This will ultimately provide Bubs with a faster route-to-market and full access into China’s Mother and Baby stores.”

“Given the current geo-political landscape and regulatory risks, this breakthrough localisation strategy for a ‘Created by Bubs’ product to be packed in China exclusively from our own Australian premium goat milk mitigates key risks and provides a secure pathway to gaining full access to the world’s largest and fastest growing Infant Formula market, valued at A$55 billion,” she added.

More reading

• I’d buy this ASX share this week
• The smartest 7 ASX shares to buy if you have $2,000
• Should you buy the beaten down shares of Bubs and Webjet?
• 2 five-star ASX growth shares to buy in August
• 2 ASX shares you could invest $500 into

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 BUBS AUST FPO. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended BUBS AUST FPO. 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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During earnings season many S&P/ASX 200 Index (ASX: XJO) shares have proven to be surprisingly resilient. The two sectors below have had to shoulder a lot of the financial burden of the coronavirus pandemic. For instance, banks have had to comply with the directives of the Australian Prudential Regulation Authority (APRA). Moreover, shopping centres have been bound by the mandatory code of conduct.  This situation is unique to Australia. 

Consequently, these ASX 200 companies are selling at absurdly cheap prices. However, there are signs that investors have begun to take advantage of them.

Shopping centres

Scentre Group (ASX: SCG) hit the news today due to a stand off with Mosaic Brands Ltd (ASX: MOZ) over rent. The ASX 200 REIT has shuttered all of the Mosaic brand stores in its centres. This reveals a few interesting facts. First, the industry is becoming increasingly hard-line in its opposition to turnover based rentals. Second, it is beginning to assert its right to make a profit for shareholders. In addition, I feel that investors also believe it is time to get the show on the road again.

For example, the Vicinity Centres (ASX: VCX) share price rallied by 5.98% on Friday. This tells me that investors are willing to spend money on bargain assets, even though there is still a long way to full recovery. The REIT posted an FY20 statutory loss of $1.8 billion due to devaluation of property. Consequently, it currently has a price-to-earnings (P/E) ratio of 4.6. In addition, the company has a net tangible asset (NTA) value of $2.29 per security. This is almost double its Friday closing price of $1.33.

One final piece of important information is the recent cancellation of its interim FY21 dividend. However, previously it had a trailing 12-month dividend yield at this price of 12.14%. A dividend that had grown this steadily by 10.6% per year on average.

Personally, I think Vicinity Centres is easily the best ASX 200 shopping centre share at its current price. Over a 3-year period, I believe this company will see a rise in share price and a reinstatement of the dividend.

An ASX 200 Bank

Suncorp Group Ltd (ASX: SUN) is Australia’s 6th largest bank based on total assets, on total deposits it ranks 8th. However, banking accounts for approximately 27.8% of its FY20 revenues, insurance services drive the remainder. This ASX 200 share booked a 32.8% decline in cash earnings. This was due to a reduction in insurance profits of 34% and banking profits down by 33.5%. The root causes of this were lower revenue from invested funds and coronavirus impacts to banking.

Yet, on Friday the company saw its share price rocket up by 11.05%. Again we see investors looking for bargains that appear to be too good to be true. Nevertheless, even with a reduction in cash earnings, its statutory net profit after tax was $913 million versus $175 million in FY19. This was due to an FY19 impairment for losses on the sale of its subsidiary Suncorp Life & Superannuation Ltd. While still lower than FY18, it is a lot better than expected.

As a diverse provider of financial services, Suncorp has several areas in which it can grow. This, to me, justifies a high price to earnings ratio of 22.81. Its full year dividend for FY20 dropped by 55%. Although understandably lower than the company’s previous trailing 12-month dividend yield of 7.25%, it still managed to deliver a full year yield of 3.7%.

I like this ASX 200 company for a couple of reasons. First, the company’s expense ratio, similar to an operating margin, is high and consistent. Second, the banking element is only 27.8% so it is not carrying as much of the financial burden of coronavirus unlike the 4 large banks. Third, the impact to insurance came principally from investment losses, not from higher payouts.  As such its risk management in underwriting seems to be about right. 

Foolish Takeaway

These are just two of the ASX 200 shares that investors are buying up while they are at historically low prices. In both cases, the underlying business remains strong, and in both cases the companies have recorded lower than expected damage from the pandemic. While everything can be impacted by a market-wide crash, ASX 200 companies see less share price volatility than smaller growth shares.

Last, and most importantly, buying these companies at a low entry price means higher dividend yields when they are reinstated fully. However, be quick to act. These shares are already starting to rise. 

More reading

• Boral cops $1.3bn body blow to profits could signal impending cap raise
• Are Webjet and other ASX travel shares taking off?
• Last week’s worst performing ASX shares
• Fortescue and 2 more ASX 200 shares to watch this week
• G8 Education share price on watch after $239 million loss

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. 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 Infomedia Limited (ASX: IFM) share price has fallen 2.2% lower this morning following the company’s release of its full year 2020 financial results. The Infomedia share price has recovered nearly 36% from its March low but is still 14.4% down for the year.

Infomedia is a technology services global developer and supplier of electronic parts catalogues and service systems to the global automotive industry. In addition, Infomedia provides information management and analysis solutions for the Australian automotive and oil industries.

Why is the Infomedia share price on watch?

Investors are selling down the Infomedia share price this morning after the company recorded full year revenues of $94.6 million during FY 2020, a 12% increase over the prior year. This however, was a slowdown on the 16% annual revenue growth achieved during FY 2019.

Earnings before interest, tax, depreciation, and amortisation (EBITDA) came in at $46 million. That was up very strongly by 21% on the prior corresponding period. Meanwhile, net profit after tax (NPAT) grew solidly by 15% to $18.6 million, while cash EBITDA grew by 11% to $21.3 million for FY 2020.

Infomedia ended the financial year in a reasonably solid financial position. Cash and cash equivalents amounted to $103.9 million as at 30 June 2020. However, it should be pointed out that $83.9 million was raised from an institutional placement and share purchase plan during May.

Infomedia Ltd CEO, Mr Jonathan Rubinsztein said:

…In the first half, we benefited from the completion of the rollout of a global contract, a strong cadence of sales across each of the regions, and the progressive development and successful early stage pilots of our Next Gen parts and service platforms.

COVID-19 associated restrictions have resulted in delayed revenue in each of our regions. However, the period has also delivered positive outcomes, including deeper customer relationships and increased focus on leveraging technology and data insights in global automotive aftersales; revenue will follow the current build of contracted sales.

Market outlook and dividend

Infomedia believes that it is well placed to emerge from the challenges of FY 2020, brought on by the pandemic, in a stronger overall position. Pleasingly, Infomedia noted that stronger customer engagement was back for the company during June and July. Also, its current backlog of dealer based and large manufacturer contracts are anticipated to be rolled out later in 2021.

However, pandemic restrictions are anticipated to delay converting some sales opportunities to revenues. Softer revenues experienced during the fourth quarter are anticipated to continue during the first half of FY 2021. Also, COVID-19 restrictions are slowing down efforts to close some international acquisitions currently in Infomedia’s pipeline. As a consequence, Infomedia decided not to provide FY 2021 revenue guidance. However, the tech company believes it is well positioned to grow solidly over the medium term.

Mr  Rubinsztein added: “COVID-19 associated restrictions have resulted in delayed revenue in each of our regions. However, the period has also delivered positive outcomes, including deeper customer relationships and increased focus on leveraging technology and data insights in global automotive aftersales; revenue will follow the current build of contracted sales”.

Infomedia declared a final dividend of 2.15 cents per share, partially franked. This brought the total dividend for FY 2020 for Infomedia to 4.3 cents. That was a 10% increase on the prior year.

At the time of writing, the Infomedia share price has edged lower to $1.78. As mentioned, whilst the Infomedia share price has recovered significantly from the March bear market, it is still trading 28.2% lower than its 52-week high.

More reading

• AMP executives resign over sexual harassment scandal
• Bubs share price storms higher on new China plans
• 2 ASX 200 bargains to buy this week
• Boral cops $1.3bn body blow to profits could signal impending cap raise
• Fortescue share price pushes higher after declaring huge FY 2020 dividend

Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Infomedia. 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 Boral Limited (ASX: BLD) share price is under the spotlight this morning with its new chief executive taking a broom to its balance sheet.

The building materials supplier announced it will take a pre-tax impairment charge of $1.3 billion against its full year results.

Most of this relates to Boral’s disastrous US expansion under its former CEO Mike King.

3 key takeaways from the billion-plus impairment

The new head honcho, Zlatko Todorcevski, is wasting no time in clearing some very big cobwebs as his feet has only been under the deck for less than two months.

More than 90% of the impairment amount relates to assets within Boral North America including goodwill, intangible assets and Boral’s investment in the Meridian Brick joint venture.

The move is noteworthy for three reasons (outside the obvious impact to Boral’s bottom line). First, I have to wonder if Boral is setting the scene for a capital raising when it officially releases its full year profit results on 28 August (more on its results below).

Cap raise on the cards?

This downgrade stands in contrast to a surprising recent surge in US housing activity and the upbeat quarterly update from its peer James Hardie Industries plc (ASX: JHX).

Write-down casts long shadow over sector

Boral’s billion-plus impairment included a $123 million charge relating to it Australian operations. Management justified the decision by pointing to the significant decline in housing construction, particularly in New South Wales.

It also highlighted the slower pace of infrastructure construction than previously expected and weak construction activity in Western Australia and the Northern Territory.

This dour assessment could weigh on sentiment towards other stocks exposed to these markets. These includes the CSR Limited (ASX: CSR) share price, Lendlease Group (ASX: LLC) share price and GWA Group Ltd (ASX: GWA) share price, just to name a few.

Boral’s FY20 results early release

Boral also effectively pre-released its FY20 results, which will officially be announced this Friday. Management said that underlying FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) will range between $820 million and $825 million.

Underlying net profit will come be at $175 million to $180 million and both figures exclude significant items like the write-down.

While the impairment is non-cash, don’t expect the group to pay a dividend. Management canned the idea of a final dividend payment after it paid an interim dividend of 9.5 cents in April.

More reading

• 2 ASX 200 bargains to buy this week
• Are Webjet and other ASX travel shares taking off?
• Last week’s worst performing ASX shares
• Fortescue and 2 more ASX 200 shares to watch this week
• G8 Education share price on watch after $239 million loss

Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. Connect with me on Twitter @brenlau.

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 Fortescue Metals Group Limited (ASX: FMG) share price is pushing higher after the release of its full year results.

At the time of writing the iron ore producer’s shares are up 2% to $18.36.

How did Fortescue perform in FY 2020?

Fortescue certainly was on form in FY 2020 and delivered record shipments, revenue, earnings, and cashflow over the 12 months. Management advised that this reflects the successful execution of its integrated operations and marketing strategy, and strong customer demand.

For the 12 months ended 30 June 2020, Fortescue posted a 29% increase in revenue to US$12,820 million. This was driven by shipments of 178.2 million wet metric tonnes and a 21% lift in its average realised price to US$78.62 a tonne.

And combined with a small decrease in its C1 costs to US$12.94 per tonne, its earnings grew even quicker. Fortescue’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased 38% to US$8.4 billion.

On the bottom line, the mining giant’s net profit after tax lifted 49% to US$4.7 billion or US$1.54 (A$2.29) per share.

Bumper dividend for shareholders.

Fortescue continued to generate strong underlying cashflows during the year. Net cash from operating activities came in at US$6.4 billion, up 47% on FY 2019’s result.

Together with its strong balance sheet, this allowed the Fortescue board to declare a fully franked final dividend of A$1.00 per share. Combined with its interim dividend of 76 Australian cents per share, Fortescue has increased its full year dividend by 54% to A$1.76 per share in FY 2020. This represents a 77% payout ratio of FY 2020 net profit after tax, which is consistent with its policy of a payout ratio of 50 to 80% of net profits.

To be eligible for this dividend, investors will need to own its shares before the ex-dividend date of 31 August. It will then be paid to eligible shareholders on 2 October.

FY 2021 guidance.

In FY 2021 the company is expecting a similar level of iron ore shipments. It has provided guidance of 175 to 180 million tonnes.

It is also forecasting flat to marginally higher costs of US$13.00 to US$13.50 per tonne. This is based on an exchange rate of 70 U.S. cents.

Capital expenditure is forecast to be US$3 billion to US$3.4 billion. This is inclusive of US$1 billion of sustaining, operational, and hub development capital, US$140 of exploration expenditure, and US$1.9 billion to US$2.3 billion for major projects. The latter includes its Eliwana, Iron Bridge, and Energy projects.

More reading

• Fortescue and 2 more ASX 200 shares to watch this week
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• Fortescue share price higher after mineral resource upgrade
• Is now a good time to buy Fortescue shares?

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 Star Entertainment Group Ltd (ASX: SGR) share price jumped 7.1% higher on Friday on the back of a solid full-year result.

Investors were bullish on the ASX wagering share to close out the week, but where is the Star Entertainment share price headed in 2020?

What did Star Entertainment report on Friday?

I think investors liked the group’s strong performance between July 2019 and February 2020.

Clearly, the coronavirus pandemic weighed on earnings in the back half of the year. State governments introduced sweeping restrictions which hurt revenues across Star’s casinos in Brisbane, Sydney and the Gold Coast.

Star reported a 22.8% decline in earnings before interest, taxes, depreciation and amortisation (EBITDA) to $430 million. However, there were strong signs for investors looking long-term given the first-half growth.

Despite a 46% drop in net profit, the Star Entertainment share price climbed higher as one of Friday’s top performers.

Tough trading conditions led the wagering group to stand down 90% of staff and focus on capital management in the short-term. No dividend was announced as management focused on maintaining solvency and liquidity in these uncertain times.

Is the Star Entertainment share price a gamble?

I certainly think the Star Entertainment share price is worth a look for $3.15 per share.

The ASX wagering group’s shares are up 23.5% in August but remain down 32.4% for the year. It’s not alone in feeling the COVID-19 pain but could be subject to further uncertainty.

I see a couple of issues facing Star Entertainment in the short-term. The first is the tight restrictions on operations with state governments unlikely to classify Star as an essential service anytime soon.

The broader, medium-term impact I see is the border closures. That’s particularly the case with international borders remaining shut given the significant revenue from international VIPs.

Both of these factors could weigh heavily on the Star Entertainment share price in 2020 and 2021. Earnings growth appears to be largely beholden to Federal and State government restrictions.

That creates some valuation uncertainty as future cash flows are very difficult to forecast. In my view, that makes Star Entertainment a strong buying opportunity or a potential falling knife.

Foolish takeaway

The Star Entertainment share price could be good value if it emerges on the other side of this with its balance sheet intact.

I do think the wagering group is a bit of a gamble given the uncertainty over the next 12-18 months.

However, that’s the case for many ASX shares in the current climate with significant potential upside from a quicker than expected recovery.

More reading

• ASX 200 flat: Suncorp surges higher, A2 Milk acquisition plans, TPG’s half year update
• Why a2 Milk, Coca-Cola Amatil, Star, & Suncorp shares are charging higher
• Star Entertainment share price rises 6% as profits fall due to shutdowns
• Why Tabcorp is the latest “conviction buy” recommendation from this top broker
• Coronavirus: SkyCity share price falls as NZ restrictions tighten

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. 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 Webjet Limited (ASX: WEB) share price led the S&P/ASX 200 Index (ASX: XJO) leaders on Friday, climbing 11.8% higher. It wasn’t the only ASX travel share on the move last week as investors piled back into the big travel companies.

Why ASX travel shares are taking off

It seems odd that ASX travel shares would be back in vogue with tight coronavirus restrictions around the company.

The prospect of international travel in the near future is bleak with even New Zealand struggling to contain a new COVID-19 outbreak.

However, investors have been bullish on the Aussie travel companies in the past week or so. 

One big factor was the heavy losses in the Webjet share price after reporting a $143.6 million full-year loss. That saw the ASX travel share fall 12% lower on Thursday before rebounding strongly to close out the week.

It was a similar story for the Flight Centre Travel Group Ltd (ASX: FLT) share price. Shares in the Aussie travel group jumped 7.1% higher on Friday but remain down 68.4% for the year.

I think there’s a bit of momentum behind the recent moves with investors hedging their bets across the travel industry.

I’m mildly bullish on the Corporate Travel Management Ltd (ASX: CTD) share price right now. The big difference here is that I think business travel will rebound much more quickly than leisure.

That means Corporate Travel earnings could outperform its peers in the short to medium-term. State borders remain shut but intra-state flights continue to run between regional hubs.

The ASX travel share jumped 4.5% higher on Friday and is now down 33.3% for the year. However, the momentum factor is also strong, with Corporate Travel shares up 57.9% since the start of August.

Momentum isn’t exactly a long-term play, but I think it certainly helps in the current environment. 

Corporate Travel’s share price fell lower after its full-year results announcement on Wednesday but investors were back buying by the end of the week.

Foolish takeaway

ASX travel shares have been rocketing higher despite tight restrictions across the country.

However, the share market is forward-looking which means investors are pricing in the short-term negative impacts.

That could mean now is a good time to snap up ASX travel companies like Webjet for a good price and hold for the long-term.

More reading

• 2 ASX 200 bargains to buy this week
• Boral cops $1.3bn body blow to profits could signal impending cap raise
• Last week’s worst performing ASX shares
• Fortescue and 2 more ASX 200 shares to watch this week
• G8 Education share price on watch after $239 million loss

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel 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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The Mcgrath Ltd (ASX: MEA) share price is on watch this morning following the release of the company’s full year 2020 financial results. The McGrath share price has had a rocky year so far with its shares falling more than 42% lower in year-to-date trading.

Why is the McGrath share price on watch?

McGrath recorded a strong turnaround in profitability during FY 2020, with underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) of $3.7 million recorded. This compared with a loss of $6.4 million recorded in FY 2019. However, it should be pointed out that this year’s result did include $2.2 million worth of government grants related to COVID-19.

McGrath also managed to recorded a solid 11% increase in revenue to $91.69 million for the full financial year. In addition, the group recorded an impressive 31% increase in sales per agent for the 12 month period. This result was achieved despite the negative impact of the coronavirus pandemic on the wider Australian residential property sector during the fourth quarter. 

Solid balance sheet

McGrath ended FY 2020 with a strong balance sheet. It had no debt on its books as at 30 June, and had $17.3 million of cash in hand. McGrath estimates that its rent roll was worth around $52.2 million at this time. $38.5 million of this amount the company noted, was not reflected on the balance sheet.

What contributed to McGrath’s improved performance?

Investors will be watching the McGrath share price closely this morning after the company announced its turnaround followed a series of strategic moves implemented during FY 2020. The company’s headquarters was moved to a new technology hub in Pyrmont. Also, a new CRM system was rolled out across McGrath’s nationwide company-owned and franchised offices, and a new website was launched. In addition, McGrath successfully acquired four company-owned offices, which complemented new franchise offices that were added during the year.

McGrath management commented on the results stating, “We are pleased with the $10 million turnaround, a return to after-tax profit and further strengthening of our balance sheet with $17.3 million in cash. Our business performed significantly better than the market during the year and we have a strong platform on which to build in 2021, notwithstanding the ongoing impacts of COVID.”

What’s next for the McGrath share price?

During FY 2021, McGrath will look to further consolidate its nationwide operations while focusing on further recruitment of suitable agents. There will also be a strong focus on further improving cost control and updating legacy systems.

McGrath did not provide revenue guidance. However, the group noted that it expects to see a decline in residential property prices over the coming months. Government support and record low interest rates, the company noted, are anticipated to minimise this trend. Also, McGrath anticipates some softness in rental yields throughout FY 2021.

The McGrath board decided to not pay an FY 2020 dividend due to the uncertain economic environment surrounding COVID-19.

The McGrath share price was trading at 19 cents at the market’s close on Friday. Whilst having recovered 18.8% from its March low, the McGrath share price is still trading 50% lower than its 52-week high.

More reading

• MoneyMe share price surges, but is it sustainable?

Motley Fool contributor Phil Harpur 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 Ecofibre Ltd (ASX: EOF) share price is on watch this morning after an impressive earnings report. It produces non-psychoactive hemp products for distribution in the United States and Australia. The company’s primary product is cannabidiol (CBD) which is used to create nutraceutical products. Other products in this category include dietary supplements, vitamins, fortified dairy products, and citrus fruits and many others. 

The company reported a 42% increase in top line revenues, and an eye watering 119% increase in net profit after tax (NPAT). The year of the coronavirus pandemic has been a foundational year for this innovating company. Indeed, it has built the infrastructure it needs to grow rapidly into a very large addressable market.

Why is the Ecofibre share price on watch?

The Ecofibre share price is likely to see an impact after announcing top line revenue reached $50.7 million in its first full year as a publicly listed company. In fact, the company’s gross margin was 76%. This is the margin between revenue and the cost of producing the product. With the addition of all other operating costs, the NPAT margin was 25.9%. These large margins clearly show the high value nature of this business. Moreover, the company was able to achieve a return on equity (ROE) of 20.9%, while increasing net assets by 48.9%.

The company has a range of subsidiaries. However, most importantly for the Ecofibre share price is Ananda health. This is the leading nutraceutical product manufacturer in retail pharmaceutical sales channel in the United States. Moreover, Ananda health recently signed a deal with CVS Pharmacy, the largest retail pharmacy company in the US. This speaks highly of the quality of Ananda Health products.

Within Australia, all Ananda hemp products are available under the Special Access Scheme (SAS) and Authorised Prescriber scheme. Health practitioners are prescribing the product for a range of conditions. In fact, a close friend of mine with multiple sclerosis is using it.

Ecofibre food products are available at Woolworths Group Ltd (ASX: WOW) stores under the ‘Macro’ brand, and through selected IGA stores under the Ananda Food brand. In addition, these products are sold wholesale to food manufacturers and other distributors. This revenue stream is still unprofitable, but it has improved on FY19. 

New revenue streams

The company commercialised its new Hemp Black line of clothing in FY20. This project started off 2 years ago with technology development at Thomas Jefferson University. Even without the sustainability impacts, hemp fibre is lightweight and absorbent, and has three times the tensile strength of cotton. 

In April, the subsidiary was ready to launch with Yoga wear to demonstrate the quality and functionality of its technologies. However, fortunately it pivoted to masks and neck gaiters to help in the fight against coronavirus. As a result, the subsidiary broke even in FY20. On 29 July, the company announced the acquisition of a portfolio of companies under the business TexInnovate, an advanced textile manufacturer. This gives Hemp Black capabilities throughout the value chain. TexInnovate also brings a number of clients with it. 

Alongside the financial information above, I think this is another demonstration of the managerial capability of Ecofibre. As well as its ability to pivot rapidly. Patents are pending on clothing and mask designs, as well as many patents over the fabric and processes the company has developed. 

Foolish Takeaway

I think the Ecofibre share price is a growth opportunity for ASX investors. It is the sector leader in the very important retail pharmacy channel for its nutraceutical product. This sector that is likely to be worth greater than $722 billion globally by 2027. This gives it a first mover advantage in a wide open market; just as Afterpay Ltd (ASX: APT) had in Australia in the beginning. Furthermore, the company is committed to continue with clinical testing and research. 

For me personally, the actions of management so far give me a strong sense of their competence and business acumen. I believe they are very well positioned for growth in a range of areas, although I am not sure about the food revenue stream. Regardless of that, the company is valued at $919.97 million and has a price to earnings ratio of 63.36. I think the high earnings multiple is justified, and I see this as a strong growth candidate over the next 12 months and beyond.

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• These 3 ASX stocks just got upgraded by top brokers to “buy” today

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Woolworths 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.

The post Ecofibre share price on watch after doubling profits appeared first on Motley Fool Australia.

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