Tag: Motley Fool

The Commonwealth Bank of Australia (ASX: CBA) share price has just seemed to go from strength to strength over the past few months.

We only have to rewind to the end of October to see CBA shares going for just $96 each. But today, those same shares are asking $115.71 at the time of writing (up 0.72% for the day so far).

Not only is that more than 20% above the price CBA was just four months ago, but it’s also just a couple of dollars short of this ASX 200 bank stock‘s all-time high of $118.24.

So it goes without saying that it’s been a great few months to own the ASX’s largest bank.

But with CBA shares recording such an enthusiastic rise over such a short space of time, many investors might be wondering what could be next for this popular ASX dividend stock.

After all, these gains have pushed CBA’s trailing dividend yield significantly below the other big four banks. Right now, CBA’s yield of 3.93% (fully franked of course) looks distinctly un-banklike, considering ANZ Group Holdings Ltd (ASX: ANZ), for example, is offering investors 6.13% today.

What’s next for the CBA share price? Goldman says sell

It may be upsetting for CBA shareholders to learn that most ASX brokers are fairly united in the view that CBA shares are currently overvalued.

How much so? Well, consider what ASX broker Goldman Sachs said earlier this month.

As my Fool colleague covered at the time, Goldman likes what it saw in CBA’s latest earnings report, which we covered here. This also went down well with the market.

However, Goldman also stated that “we do not think this justifies the 55% 12-month forward PPOP [pre-provision operating profit] premium CBA is currently trading on versus peers (ex-dividend adjusted)”.

Goldman pointed out that CBA shares have almost always traded at a premium to their peers. But it also noted that the average premium over the past 15 years has been around 29%, as opposed to the current 55%.

Goldman also reckons CBA’s annual dividends will stay relatively flat at $4.55 per share until the end of the 2026 financial year.

That’s the primary reason why Goldman has a sell rating, as well as a 12-month share price target of just $81.98 per share for CBA. If this proves accurate, investors could lose approximately 30% from the current share price over the coming 12 months.

A final caveat though. ASX brokers like Goldman have been bearish on CBA shares for a long time now. And yet this has done nothing to stop the bank from clocking new record highs, and investors from banking significant gains, in recent months.

So who knows where the CBA share price will head next.

The post Up 20% in 4 months, where’s next for the CBA share price? appeared first on The Motley Fool Australia.

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More reading

• Here’s the CBA dividend forecast through to 2026
• Why is the CBA share price sinking on Wednesday?
• High rates, falling profits: Why are ASX bank shares losing out this reporting season?
• You need to act fast if you want to receive the next CBA dividend
• Why these 3 top ASX 200 stocks grabbed the Motley Fool’s headlines this week

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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 Scott Phillips.

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The Adairs Ltd (ASX: ADH) share price is setting the bar high today.

Shares in the All Ordinaries Index (ASX: XAO) retail stock closed Friday trading for $1.84. During the Monday lunch hour, shares are swapping hands for $2.06 apiece, up 12.2%.

For some context, the All Ords is flat at this same time.

The company, whose store brands incorporate Adairs, Focus on Furniture, and online shop Mocka, reported on its half-year results this morning for the 27 weeks to 31 December (1H FY2024).

Read on for the highlights.

Adairs share price leaps amid increasing margins

• Total sales of $291.4 million, down 10.1% year on year
• Statutory net profit after tax (NPAT) of $17.7 million, down 18.9% from 1H FY 2023
• Gross margin rate improved by 2.20% year on year
• Operating cash flow of $37.9 million, up 10.5% from 1H FY 2023,
• Net debt of declined by $15.4 million since June to $58.6 million
• Fully franked interim dividend of 5 cents per share, down from the prior interim dividend of 8 cents per share

What else happened with Adairs during the half?

Management noted that sales over the six months were hit by a challenging macro-environment alongside issues with stock availability.

However, investors look to be bidding up the Adairs share price today, with the company having successfully grown its gross margins across all three of its store brands.

Despite ongoing inflationary pressure, costs at its Adairs business came down over the half year via the company’s comprehensive cost-out program.

The six-month period saw Adairs open two new Focus on Furniture stores along with taking operational control of Adairs NDC.

The company also managed to achieve earnings before interest and tax (EBIT) of $3.5 million from the struggling online Mocka business, compared to a $300,000 loss in the prior corresponding period.

And passive income investors will certainly be pleased to see Adairs resume its dividend payments. The company opted not to pay a final dividend for FY 2023.

What did management say?

Commenting on the results sending the Adairs share price sharply higher today, CEO Mark Ronan said:

The first half of FY 2024 has been challenging given customers continue to manage their household budgets carefully, leading to lower customer traffic.

It is pleasing that we have been able to deliver on our primary objectives whilst focusing on those factors within our control – making sure we continue to offer great product at an attractive price with an outstanding customer experience across all of our businesses.

Each business has key priorities that will over time deliver growth in sales while ensuring our cost base is managed appropriately for the prevailing and anticipated trading environment.

What’s next?

Looking to what might impact the Adairs share price in the months ahead, the company cautioned that customer traffic over the first eight weeks of the current half had been “significantly lower than the same period last year”. Sales, therefore, “remain challenging”.

However, noting the big drop in sales in May 2023, management expects comparative sales will improve across the second half of FY 2024.

The company has hedged all of its FY 2024 US dollar purchases at AU$0.69.

Adairs share price snapshot

Despite today’s big boost, shares in the All Ords retailer remain down 8% over 12 months.

The Adairs share price has leapt 71% since the recent 27 October lows.

The post Adairs share price rockets 12% as dividend payments resume appeared first on The Motley Fool Australia.

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More reading

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Adairs. The Motley Fool Australia has positions in and has recommended Adairs. 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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If you own, or plan to own, Xero Ltd (ASX: XRO) shares, then you may know that this week is an important one for the cloud accounting platform provider.

That’s because it is scheduled to hold its inaugural investor day event on Thursday.

Ahead of the event, let’s now take a look at what the market is expecting from tech stock.

What is expected at the event?

Goldman Sachs has been looking ahead to the event and has laid out its expectations. It said:

We expect the session to outline the recently finalized Long Term strategy. We don’t expect any major changes, more we expect a strategy centered around refocusing the business on its core strengths (SMB cloud accounting within key existing geographies), while driving disciplined earnings growth (reorganizations, not restructures). This will be a result of ongoing product investment into core Xero features – but with an increased use of partnerships with best in class providers (Avalara, Finks, Sumday etc) – allowing Xero to lead on product to accelerate sub growth, while growing margins.

The broker is also looking for the following:

We also look for updates on: (1) The targeted growth plan in the US; (2) The path towards re-accelerating UK growth; (3) Strategies to sustain growth in the more mature ANZ business (incl. price & mix) alongside further commentary around recent leadership changes in APAC & AU; and (4) Uses of GenAI to drive value (i.e. Intuit Assist, Sage Copilot).

What about earnings guidance?

Goldman acknowledges that it is unlikely that Xero will release any medium term guidance with its investor day update.

However, in case it does, it has revealed what it will be looking for. It said:

Although desirable, we believe they [financial targets] are unlikely to be provided by XRO (outside of re-iterating the Rule-of-40 guardrails & opex composition outlook). However we forecast: (1) FY28 Revenue of NZ$3.0bn (VAe $3.1bn), a 16% CAGR (14% sub, +2% ARPU – impacted by geo mix, i.e. Aust ARPU +5%); and (2) FY28E EBIT margin of 24.3% (vs. VAe 25.8%).

Should you buy Xero shares?

Goldman is feeling confident going into the event and has reiterated its buy rating and $141.00 price target.

This implies potential upside of almost 16% for investors over the next 12 months.

The post Buying Xero shares? Here’s what to expect from this week’s update appeared first on The Motley Fool Australia.

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More reading

• I’d buy these great ASX growth shares in March
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• Here’s how the ASX 200 market sectors stacked up this week

Motley Fool contributor James Mickleboro has positions in Xero. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Xero. The Motley Fool Australia has positions in and has recommended Xero. 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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If you want to receive the next Telstra Group Ltd (ASX: TLS) dividend, then you will have to get a wriggle on.

That’s because it won’t be long until the telco giant’s shares trade ex-dividend.

When that happens, it means the rights to the upcoming dividend are settled.

The Telstra dividend

In case you missed it, earlier this month Telstra released its half-year results and declared its interim dividend for FY 2024.

Telstra reported a 1.2% increase in total income to $11,700 million and a 3.1% lift in underlying EBITDA to $4,001 million.

This allowed its board to increase its fully franked interim dividend by 5.9% to 9 cents per share.

Management points out that this is consistent with its capital management framework to maximise the fully franked dividend and seek to grow it over time.

What next?

Telstra’s shares are scheduled to go ex-dividend on Wednesday 28 February. This means that you will have to be on its share register at the market close on Tuesday to receive its payout on pay day.

If you are eligible, you can look forward to receiving the 9 cents per share Telstra dividend in your bank account a month later on 28 March.

Based on the current Telstra share price of $3.87, this dividend equates to a yield of 2.3%.

And with the market expecting a 9 cents per share final dividend to be declared in August, you’re looking at a 12-month dividend yield of approximately 4.6% if buying at current prices.

The good news is that Goldman Sachs then expects an increase to 19 cents per share in FY 2025 and then 20 cents per share in FY 2026. This will mean yields of 4.9% and 5.15%, respectively.

The post Act fast if you want to receive the next Telstra dividend appeared first on The Motley Fool Australia.

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• 3 ASX dividend shares to buy before it’s too late
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Telstra Group. 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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Before we start… an announcement of a new, free, live series!

This week (i.e. starting at lunchtime today!) From 26th February – 1st March 2024, we’ll be presenting week of webinars on important financial topics like budgeting, eliminating debts, saving and investing. They’re hosted by yours truly, and I’ll make them as interesting and informative as possible. No jargon; no barriers; just simple, actionable insights, designed to help you get on top of your financial goals.

If you’d like to know more about this event, reserve a spot, or sign up for our handy reminder emails, just click here! The full agenda can be seen on the event page.

—–

Whenever Warren Buffett speaks, or writes, I pay attention.

Both because he’s been astoundingly successful and (not coincidentally) he’s almost always right.

He’s made a very large fortune, by doing the right things and the right time. And, frankly, the former is far, far more important than the latter, because the outcomes compound for longer, and they’re far more reliable.

(Trying to guess, on timing, is a mug’s game. Take the opportunity if it’s presented to you, but don’t try to speculate, in advance, on the right times to buy and sell.)

Buffett released his eagerly-awaited letter to shareholders of his company, Berkshire Hathaway (I’m one such shareholder) over the weekend. And, as is often the case, there’s plenty to learn from.

This year’s letter started a little differently, however. It was a tribute to Buffett’s long-time business partner, Charlie Munger, who died late last year.

In Buffett’s typically humble style, he credits Charlie with much of Berkshire’s success. And, in doing so, highlights just what he believes delivered that success:

“Warren … now that you control Berkshire, add to it wonderful businesses purchased at fair prices and give up buying fair businesses at wonderful prices. In other words, abandon everything you learned from your hero, Ben Graham. It works but only when practiced at small scale.” 

And, in an act of particularly great humility, given the almost-60 years he’s run Berkshire, Buffett wrote:

“In the physical world, great buildings are linked to their architect while those who had poured the concrete or installed the windows are soon forgotten. Berkshire has become a great company. Though I have long been in charge of the construction crew; Charlie should forever be credited with being the architect.”

Buffett also reminded us of how he does (and we should) invest:

“Our goal at Berkshire is simple: We want to own either all or a portion of businesses that enjoy good economics that are fundamental and enduring. Within capitalism, some businesses will flourish for a very long time while others will prove to be sinkholes. It’s harder than you would think to predict which will be the winners and losers. And those who tell you they know the answer are usually either self-delusional or snake-oil salesmen.”

(It’s something I’ve written over and over again: outcomes are never knowable. Our best chance is to invest probabilistically, aiming to be right more than wrong, and have those successes gain more than our failures lose.)

And a warning:

“Though the stock market is massively larger than it was in our early years, today’s active participants are neither more emotionally stable nor better taught than when I was in school. For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young. The casino now resides in many homes and daily tempts the occupants.”

He also reminds us of both the responsibility of company managers, and that we should be careful when reading their press releases:

“We cherish their presence and believe [shareholders] are entitled to hear every year both the good and bad news, delivered directly from their CEO and not from an investor-relations officer or communications consultant forever serving up optimism and syrupy mush.”

Using two businesses Berkshire has long held in its portfolio, Buffett shares this lesson:

“The lesson from Coke and AMEX? When you find a truly wonderful business, stick with it. Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable.”

The last key takeaway from the letter? A table Buffett updates every year, showing the per share price of Berkshire, against the S&P 500 Index (SP: .INX).

In 2023, Berkshire trailed the S&P, gaining a very strong 15.8% as the index rose an astonishing 26.3%

But over the total time Buffett has run Berkshire?

The S&P’s average annual gain was 10.2%, for an extraordinary compound gain of 31,223%.

And Berkshire? A not-quite-double of 19.8% per annum. But because of compounding, the total result since 1965 isn’t just double. Or even 10 times as large.

Berkshire, under Buffett, has grown its shareholders’ wealth by an extraordinary 4,384,748%.

And no, that is not a typo.

In short? When investing, it can be very useful to ask yourself: What would Warren Buffett do? I think, faithfully applied, you’ll be very happy with the results of such an approach.

Do yourself a favour and read the whole letter!

(For those who are interested, let me finish with a little rampant speculation: The tone of the letter was heavily of the ‘we’ll do okay, but massive gains and regular purchases of large businesses are probably behind us’. Berkshire is buying back its own shares when prices are cheap, but I don’t think it’ll be particularly long before it pays its first dividend since 1965 to deploy some of the cash that continues to pile up on the company’s balance sheet. I could, of course, be spectacularly wrong!)

Fool on!

The post Buffett’s latest thoughts on business, investing and Berkshire appeared first on The Motley Fool Australia.

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More reading

• Here are Warren Buffett’s tips to becoming rich with ASX shares
• No savings in 2024? I’d follow Warren Buffett and start building wealth
• What can ASX investors learn from Warren Buffett’s latest buys and sells?
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Motley Fool contributor Scott Phillips has positions in Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. 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 Aussie Broadband Ltd (ASX: ABB) share price is up 1.4% at $4.60 this morning after the company announced a takeover bid for Superloop Ltd (ASX: SLC). In addition, it has acquired a 19.9% interest in Superloop.

Offer details

This bid is a non-binding indicative proposal to buy the whole of Superloop.

If accepted, Superloop shareholders would get 0.21 Aussie Broadband shares for each Superloop share they own. When Aussie Broadband made its bid, that value implied was 95 cents per share,. This was based on the closing Aussie Broadband share price of $4.53 on 23 February 2024.

Based on the Superloop share price of 88 cents on 23 February 2024, the offer premium was 8%.

Aside from the value on offer, why would Superloop shareholders want to accept? Aussie Broadband said through ongoing ownership in Aussie Broadband, there would be participation in the future value creation of the combined business including through synergies over time.

What are the benefits to owners of Aussie Broadband shares?

The company pointed to four key elements it considered compelling reasons for the deal.

It would make Aussie Broadband a larger player in Australia, providing broadband access services for more than 1 million subscribers, with “greater reach and network infrastructure” through three brands – Aussie Broadband, Superloop and Exetel.

The combined business would have a growing business segment with an enhanced product offering and end-to-end capabilities to compete with existing sizeable players.

A merged business would have a “strong” wholesale offering that was “well-positioned” for growth through improved scale and investment.

Finally, Aussie Broadband said a number of synergies could be achieved with network cost duplication and other normal cost areas.

Not agreed yet

The takeover hasn’t been agreed, but Aussie Broadband has bought a 19.9% interest in Superloop at a cost of 95 cents per share.

The companies would first need to tick off several conditions, including the need for Aussie Broadband to complete satisfactory confirmatory due diligence. The two ASX telco shares must enter into a scheme implementation deed, and the Superloop board must make a unanimous recommendation.

Superloop will presumably respond in due course.

Aussie Broadband noted there was no certainty the proposal would result in a transaction.  

Aussie Broadband share price snapshot

Over the past year, the Aussie Broadband share price has risen by more than 50%. There was a strong positive reaction to its recent result.

The post Aussie Broadband share price rises on 1 million customer-strong merger appeared first on The Motley Fool Australia.

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More reading

• Why Aussie Broadband, Australian Ethical, Jumbo, and Vulcan are racing higher
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Aussie Broadband. The Motley Fool Australia has recommended Aussie Broadband. 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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Alumina Ltd (ASX: AWC) shares are off to the races today.

The S&P/ASX 200 Index (ASX: XJO) resources company closed on Friday trading for $1.02. At the time of writing on late Monday morning, shares are changing hands for $1.10 apiece, up 7.6%.

For some context, the ASX 200 is up 0.5% at this same time.

This comes amid news of a $3.3 billion takeover bid from its joint venture partner Alcoa Corp (NYSE: AA). Alumina owns some 40% of Alcoa World Alumina & Chemicals (AWWC) through the joint venture.

Here’s what we know.

Alumina shares rocket on takeover offer

Alumina shares are soaring after the company confirmed it has received a non-binding, indicative and conditional proposal from Alcoa to acquire 100% of its stock via a scheme of arrangement.

Alcoa is offering 0.02854 shares of its common stock for each Alumina share.

This represents a 13.1% premium to the share price of Alumina on Friday, 23 February. And it implies a 19.5% premium based on the average exchange ratio over the last 12 months.

Alcoa’s bid comes after earlier indicative offers and a period of negotiation. The US resources giant now has a 20-business day period of exclusivity.

Subject to standard conditions and the lack of a superior proposal, the Alumina board and CEO Mike Ferraro said they intend to recommend shareholders vote in favour of the takeover offer.

Alcoa noted that it’s entered into an agreement with Allan Gray Australia giving the company the right to acquire up to 19.9% of Alumina for 0.02854 Alcoa shares for each Alumina share.

Commenting on the acquisition proposal, Alcoa CEO William Oplinger said (quoted by Bloomberg):

We recognise the value creation opportunities possible under a simplified ownership structure, including the ability to implement AWAC’s operational and strategic decisions on an accelerated basis. We believe now is the right time to consolidate ownership in AWAC.

How has Alumina stock been tracking?

2024 has been a rewarding year for Alumina shareholders to date, with the stock now up 18% since the opening bell on 2 January.

The post Alumina shares leap 8% on Alcoa takeover bid appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• How ASX shares vs. property performed in January
• These were the best performers on the ASX 200 in January
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The Lynas Rare Earths Ltd (ASX: LYC) share price is having a solid start to the week.

In morning trade, the rare earths producer’s shares are up 4% to $6.08.

This is despite the release of the company’s half-year results, which revealed a sharp drop in profits.

Lynas share price charges higher despite falling profits

• Revenue down 36.5% to $234.8 million
• Earnings before interest and tax (EBIT) down 80% to $31.8 million
• Net profit after tax down 73.6% to $39.5 million
• Cash and equivalents balance of $686.1 million

What happened?

For the six months ended 31 December, Lynas reported a disappointing 36.5% decline in revenue to $234.8 million. This was driven by a sharp decline in rare earths prices during the period.

And while its cost of sales declined 14% year on year to $159 million, this wasn’t anywhere near enough to stop its EBIT collapsing 80% to $31.8 million.

But thanks to a sizeable cash balance and higher interest rates, the company’s net profit after tax was greater than its EBIT at $39.5 million. This appears to have been better than the market was expecting.

Management commentary

Lynas’ CEO, Amanda Lacaze, commented:

Notwithstanding the exciting expansion and exploration activities undertaken in the half year, and the low market price environment, I am pleased to report a profitable first half for the business. Continued demand for Lynas products and careful management of inventory and operating costs resulted in revenue of $234.8m, EBITDA of $62.6m and a net profit (NPAT) of $39.5m.

Outlook

Lacaze remains very upbeat on the company’s future due to increasing demand for rare earths. She said:

The rare earths market is important to many industries and we continue to see strong customer demand for Lynas’ products. Lynas has a proven track record of managing costs and operations to ensure that we can be successful in all market conditions, and across all stages of the market cycle. Optimising our industrial footprint through operating efficiencies and capital growth projects will ensure Lynas is well positioned to benefit from forecast market growth and any improvement in market pricing conditions.

The Lynas share price is down 24% over the last 12 months.

The post Lynas share price charges higher despite 74% half-year profit decline appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The Suncorp Group Ltd (ASX: SUN) share price is charging ahead today.

Shares in the S&P/ASX 200 Index (ASX: XJO) banking and insurance company closed Friday trading for $15.13. In early trade on Monday, shares are swapping hands for $15.49 apiece, up 2.4%.

For some context, the ASX 200 is up 0.4% at this same time.

This comes following the release of Suncorp’s half-year results for the six months ending 31 December (1H FY2024).

Here are the highlights.

Suncorp share price lifts on profit boost

• Cash earnings of $660 million, up 13.8% from 1H FY2023
• Net profit after tax (NPAT) of $582 million, up 5.4% year on year
• Net investment income of $396 million, up 137% from 1H FY2023
• Fully franked interim dividend of 34 cents per share, up from 33 cents per share

What else happened with Suncorp during the half year?

Perhaps the biggest event, which occurred after the end of the half year, was the 20 February decision by the Australian Competition Tribunal greenlighting the proposed sale of Suncorp Bank to ANZ Group Holdings Ltd (ASX: ANZ).

The deal is still awaiting final approval from the Queensland government and the Federal Treasurers. But Suncorp reported it still expects ANZ’s acquisition of its banking arm to complete around the middle of 2024.

Suncorp expects net proceeds of $4.1 billion from the sale. Management said they remain “committed to returning to shareholders any capital that is excess to the needs of the business following completion”.

The Suncorp share price gained on the 20 February news, while ANZ shares hit some headwinds.

That could be because the banking sector, more broadly, is coming under some pressure. Suncorp Bank is no exception, with its net interest margin (NIM) dropping from 2.03% in 1H FY 2023 to 1.80% in the half year just past. Costs were up too, with a cost to income ratio of 58.4%, up from 49.9% a year ago. Suncorp Bank profit after tax of $192 million was down 25.0%.

On the insurance front, Suncorp reported gross written premium (GWP) growth of 16.3% in its General Insurance business. The company said this reflected customer growth and price increases driven by increasing reinsurance costs, elevated natural hazard experience and ongoing inflationary pressures.

The total cost of natural hazard events came in $112 million below Suncorp’s allowance for the half year at $568 million.

What did management say?

Commenting on the results sending the Suncorp share price higher today, CEO Steve Johnston noted it was a challenging six months amid ongoing inflationary pressures and six severe weather events in Australia in November and December.

Against this backdrop, the group has continued to work hard to support its customers while also delivering improved earnings driven by increased customer demand for our products and services and positive investment performance over the half.

Net investment returns were up significantly from $167 million in 1H23 to $396 million, and this has been a key contributor to our reported earnings and profit for the half.

On the Australian Competition Tribunal’s decision to authorise the sale of Suncorp Bank to ANZ, he added, “The decision brings us one step closer to becoming a dedicated Trans-Tasman insurer proudly headquartered in Queensland.”

What’s next?

Looking at what could impact the Suncorp share price in the months ahead, the company forecasts GWP growth in the low to mid-teens for FY 2024.

On the cost front, the company expects expense ratios in the second half similar to the first half. This also reflects ongoing investment in growing its business.

And there’s the pending completion of the sale of Suncorp Bank to ANZ, expected mid-year.

Suncorp share price snapshot

The Suncorp share price is up 20% in 12 months, not including the two dividend payouts.

The post Suncorp share price marching higher on 14% earnings boost appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The TPG Telecom Ltd (ASX: TPG) share price is having a tough start to the week.

In early trade, the telco’s shares are down 10% to $4.82.

This follows the release of the company’s full year results.

TPG share price sinks on FY 2023 results

• Revenue up 4.3% to $4,632 million
• Statutory EBITDA down 12.2% to $1,875 million
• Normalised EBITDA up 7.6% to $1,930 million
• Final dividend of 9 cents per share

What happened during the year?

For the 12 months ended 31 December, TPG reported a 4.3% increase in revenue to $4,632 million. Management advised that this reflects mobile subscriber and average revenue per user (ARPU) growth.

Things weren’t quite as positive for its statutory EBITDA, which fell 12.2% to $1,875 million.

However, it is worth noting that the prior corresponding period included a one-off gain on its tower sale. On a normalised basis, EBITDA rose 7.6% to $1,930 million.

TPG’s statutory net profit after tax was $49 million, down from $513 million in FY 2022. This was once again due largely to the tower sale a year earlier. In addition, higher depreciation and amortisation costs, as well as higher market interest rates weighed on its profits.

Adjusted net profit after tax was down 9.6% to $584 million but its dividends for FY 2023 were flat at 18 cents per share.

How does this compare to expectations?

While the company’s result was largely in line with expectations, its guidance fell short. This appears to be why the TPG share price is falling today. Goldman Sachs commented:

FY24 Outlook: (1) EBITDA guidance $1,950-$2,025mn (vs. GSe: A$2,050mn; Visible Alpha Consensus Data: A$2,042mn) – noting EBITDA guidance now excludes transaction costs, includes transformation costs (was opposite prior).

Management commentary

TPG’s CEO, Iñaki Berroeta, said:

Our mobile business has achieved solid gains driven by new subscribers and the successful refresh of plans across our premium Vodafone brand as we position our business for sustainable growth in a competitive market. Our transformation continues at pace, and we are seeing the positive impact of simplifying and removing complexity from the business. These benefits will accelerate in the coming years as we deliver better network and service experiences for our customers.

Outlook

As noted above, TPG has provided guidance for FY 2024 EBITDA with its result.

It expects this to be in the range of $1,950 million to $2,025 million. This represents an increase of 1.4% to 5.3% year on year on a comparable basis.

Berroeta concludes:

We are pleased with the very strong growth we delivered in FY23 and expect to deliver further growth in FY24 at the same time as we continue to invest in the transformation and simplification of our business. We are confident in the outlook for strong improvements in cash earnings over the next few years, supporting returns for shareholders as the working capital, capital investment and interest cost cycles reduce from currently elevated levels.

The post TPG share price crashes 10% on FY 2023 results appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Tpg Telecom. 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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