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The TPG Telecom Ltd (ASX: TPG) share price is in focus today on news of a potential demerger of its business.

There are several different parts of TPG’s business. It operates many different telecommunication brands including Vodafone, TPG and Lebara.

It also owns and operates nationwide mobile and fixed networks that are used to connect Australians.

Potential TPG demerger?

It’s the infrastructure side of the business that could be separated.

According to reporting by The Australian, TPG has chosen Bank of America to help it with the sale of its telco tower portfolio worth $1 billion.

But the newspaper also reported on speculation that a demerger could mean all of its infrastructure assets being divested which could also include the fibre network. Only the operating company might remain. If this option were to be pursued then it could mean those TPG assets being sold/divested for “billions of dollars”.

Potential investors might be interested in TPG’s assets because its fibre network is new and advanced after a period of recent construction.

If some sort of deal were to happen, The Australian suggested that TPG would still keep holding a stake in the demerged entity.

Is there any precedent for this sort of deal?

There has been a lot of merger and acquisition activity over the last year. Telco rival Telstra Corporation Ltd (ASX: TLS) has already done somewhat of a similar move.

At the end of June 2021, Telstra announced it was selling 49% of its towers business for $2.8 billion. The sale was to a consortium consisting of the Future Fund, Commonwealth Superannuation Corporation and Sunsuper.

Telstra’s towers business is the largest mobile tower infrastructure provider in Australia with approximately 8,200 towers. That transaction valued the Telstra InfraCo Towers business at $5.9 billion.

It was also reported that AustralianSuper agreed last year to pay Singtel’s Optus $1.9 billion to own 70% of the telecom towers business.

TPG share price snapshot

Over the last month the TPG share price has fallen over 8%. In the last 12 months it has declined by 17.6%.

The post Are TPG Telecom (ASX:TPG) shares gearing up for a demerger? appeared first on The Motley Fool Australia.

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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 no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool Australia has recommended TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Origin Energy Ltd (ASX: ORG) share price is plunging lower on Friday despite a top broker predicting big things to come.

UBS has retained its bullish view of the stock despite its first half earnings detailing a rough period for the company.

At the time of writing, the Origin share price is $5.74, 6.74% lower than its previous close.

For context, the S&P/ASX 200 Index (ASX: XJO) is currently also down, having slipped 0.5%.

Origin’s dip follows today’s non-price sensitive announcement from the company stating it has completed a sale of a 10% interest in Australian Pacific LNG (APLNG).

Here’s what UBS analysts are saying about the energy stock’s future.

What does UBS think of Origin’s first half earnings?

The Origin share price is suffering despite UBS’ positivity on its future.

Origin released its earnings for the first half of financial year 2022 yesterday.

Within them, it announced its statutory net profit after tax (NPAT) had risen to $248 million – notably below UBS’ guidance.

As The Australian reports, the broker expected the company’s half year profits to reach $354 million.

Additionally, analysts Tom Allen and Joseph Wong were disappointed Origin hadn’t increased its Energy Markets guidance and provided lower-than-expected guidance for its stake in APLNG.

Its Energy Market’s guidance for financial year 2022 is still $450 million to $600 million of earnings before interest, depreciation, amortisation, and tax (EBITDA).

Meanwhile, Origin expects to receive $1.1 billion of cash flows from APLNG.

However, UBS isn’t worried. The publication quoted the analysts as saying the company’s earnings “appeared positive overall.”

Additionally, the broker is excited about yesterday’s major news from Origin.

What will Eraring’s closure mean for Origin shares?

Origin has decided to close the doors of its Eraring coal-fired power station in 2025 – 7 years earlier than previously expected.

In its place, Origin will build what could be a 700-megawatt battery.

The UBS analysts said the plan will likely “create value for shareholders”.

“[T]he prevailing economics for Eraring face significant headwinds from increased renewable generation capacity, and thermal coal price exposure,” they said.

As more renewable generation capacity enters the market, volatility in intraday price spreads increases. This means the economics for baseload coal-fired generators, like Eraring, will be increasingly challenged as they cannot react to the low wholesale prices during the middle of the day.

What does the broker expect from the Origin share price?

UBS has retained its high expectations of the Origin share price despite its softer-than-expected first half.

It still rates the stock as a ‘buy’ and has slapped it with a price target of $6.65.

That represents a 15.8% upside on the currently Origin share price.

The post Origin (ASX:ORG) share price slides 7% but UBS is still bullish. Here’s why appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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 Bruce Jackson.

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The Ethereum (CRYPTO: ETH) price is down more than 8% over the past 24 hours, currently trading for US$2,885 (AU$4,024).

The overnight loss is enough to send the Ethereum price down by more than 6% since this time last week.

While the majority of cryptos in the top 100 list (by market cap) are in the red over the past seven days amid the current hefty sell-off, a few have managed to hold on to some outsized gains.

Rally crypto surges 25% this week

Despite plunging 17% in the past 24 hours, Rally (CRYPTO: RLY) remains up 25% for the full week.

While we weren’t able to find any direct reason for Rally’s, erm, rally this week, Twitter posts suggest that some deep-pocketed crypto investors have been buying the token over the past few days. Though those same investors may well be the ones hitting the sell button today, driving down the Rally price, the Ethereum price, and most of the top cryptos.

So what exactly is Rally?

According to CoinMarketCap:

Rally is a social token-oriented protocol that allows creators to launch their own token and build a digital economy around their work. In this way, creators … can tap into their communities and offer benefits and perks to recruit, retain and monetize their following in a frictionless manner. Each creator on Rally receives a fully customizable, branded cryptocurrency they can use however they deem fit.

With a total market valuation of US$744 million, Rally counts as the 96th biggest crypto in virtual circulation.

Why is the Ethereum price tumbling?

While Rally’s outsized gains of the past few days leave it up for the week, it hasn’t been immune to the same forces pulling down the Ethereum price.

As with the tumbling Bitcoin price, today’s sell-off is predominantly driven by investor jitters over a possible Russian incursion into Ukraine. While Russian officials deny any intent to invade, the United States is warning that Russian forces could attack at any moment.

That geopolitical uncertainty has sent most risk assets – like high growth tech shares and cryptocurrencies – deep into the red.

While the fortunes of even the biggest cryptos, like Ethereum, have joined the risk-off sentiment, investors seeking haven assets are driving up the price of gold. That’s seeing ASX gold shares post outsized gains today, even as the All Ordinaries Index (ASX: XAO) remains down 0.6%.

The post The Ethereum (CRYPTO:ETH) price tanked this week while this crypto rallied 25% appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Bitcoin and Ethereum. The Motley Fool Australia owns and has recommended Bitcoin and Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

 

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The St Barbara Ltd (ASX: SBM) share price is in positive territory on Friday.

At the time of writing, the gold miner’s shares are trading for $1.49, up 1.71%. This means in the past week, its shares have accelerated by 7%.

Let’s take a closer look at some of the factors that are influencing St Barbara shares.

What’s happening at St Barbara?

The St Barbara share price is being pumped up today as the price of gold has surged to US$1,900 an ounce. This follows the tense stand-off between the West and Russia over NATO’s expansion and Ukraine’s potential membership in the alliance.

In times of uncertainty, investors traditionally run to safe-haven assets like gold which has spiked around 5.5% since early February.

In addition, the company released its ore reserves and mineral resources update to the ASX early this morning.

St Barbara highlighted the following:

Total ore reserves are estimated at: 97.8 Mt (million tonnes) @ 1.8 g/t Au (grams of gold per tonne) for 5.8 Moz (million ounces) of contained gold, comprising:

• Leonora Operations: 12.9 Mt @ 5.1 g/t Au for 2.1 Moz of contained gold
• Simberi Operations: 36.7 Mt @ 1.8 g/t Au for 2.1 Moz of contained gold
• Atlantic Operations: 48.2 Mt @ 1.0 g/t Au for 1.6 Moz of contained gold

In summary, the company’s ore reserves have decreased by 460koz (thousand ounces) since 30 June 2021. This was due to adopting an open-pit mining approach to its Tower Hill project in Western Australia and thus removing its underground reserves.

St Barbara advised Tower Hill’s ore reserves will be adjusted following the completion of a pre-feasibility study in Q1 FY23.

Furthermore, the mineral resources statement is listed below:

Total mineral resources are estimated at: 215.8 Mt @ 1.9 g/t Au for 13.5 Moz of contained gold, comprising:

• Leonora Operations: 67.2 Mt @ 3.4 g/t Au for 7.3 Moz of contained gold
• Simberi Operations: 90.0 Mt @ 1.5 g/t Au for 4.2 Moz of contained gold
• Atlantic Operations: 58.6 Mt @ 1.1 g/t Au for 2.0 Moz of contained gold

The company’s mineral resources have increased since the beginning of the new financial year. The change of mining approach for Tower Hill led to the inclusion of additional mineral resources following the net mining depletion.

About the St Barbara share price

Over the past 12 months, St Barbara shares have plummeted around 28%, with year-to-date up marginally by 2%. The company’s share price reached a 52-week high of $2.16 in early 2021 before treading on a downward path.

Based on today’s price, St Barbara commands a market capitalisation of roughly $1.06 billion, with approximately 709.53 million shares outstanding.

The post Here’s why the St Barbara (ASX:SBM) share price is climbing today appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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 Bruce Jackson.

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The Nickel Mines Ltd (ASX: NIC) share price has been struggling lately despite releasing a barrage of seemingly good news.

Over the last 30 days, it released news of a solar deal, an acquisition, and its quarterly activities report.

Sadly, over the same period, the Nickel Mines share price has tumbled 15.09% to trade at $1.37.

For context, the S&P/ASX 200 Index (ASX: XJO) and the All Ordinaries Index (ASX: XAO) have both slipped 2% over the last month.

Let’s take a look at what exactly has been dragging the nickel explorer and developer’s stock lower over the last month.

Here’s what’s driven the Nickel Mines share price lately

It’s been a busy month for Nickel Mines. And while it’s been releasing numerous announcements, the market has been bidding its share price lower.

The first dip came on 19 January when the company released news of a deal that could see a 200-megawatt peak solar farm built within the Indonesia Morowali Industrial Park.

Power from the solar farm would be able to power Nickel Mine’s processing activities.

Shortly after, the company released its quarterly activities report.

Over the 3 month period ended 31 December, the company’s production and earnings before interest tax, depreciation, and amortisation (EBITDA) were relatively flat with the previous quarter’s.

While January was tough on Nickel Mines’ stock, February brought plenty more drama.

The Nickel Mines share price was put in the freezer on 9 February. It was thawed after the company released news of a US$225 capital raise.

As part of the raise, shares in the company were offered for $1.37 apiece in two placements – each worth $148 million – and an ongoing share purchase plan – worth $18 million.

The funds raised will go towards the acquisition of a 30% stake in the Oracle Nickel Project.

The company announced today that it has paid US$53 million for an initial 10% stake. The other 20% is expected to be acquired by June.

Eventually, it hopes to hold a 70% interest in the project for a total cost of US$525 million.

Nickel Mines said the acquisition “represents [its] next wave of growth” and “provides a clearly defined growth path to the company becoming a top-10 global nickel producer”.

Unfortunately, despite all its seemingly positive news, the company’s stock has only spent 8 trading days in the last month in the green.

Though, the Nickel Mines share price is still 4.5% higher than it was this time last year.

The post Why has the Nickel Mines (ASX:NIC) share price dumped 15% in a month? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper 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 Bruce Jackson.

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The Whitehaven Coal Ltd (ASX: WHC) share price is on course to end the week on a positive note.

In afternoon trade, the coal miner’s shares are up 4% to $3.14.

Why is the Whitehaven share price charging higher?

Investors have been bidding the Whitehaven share price higher today after brokers responded positively to its half year results.

In case you missed it, the coal miner reported a 106% increase in revenue to $1.44 billion and a 1,600% jump in EBITDA to a record of $632 million. This strong result was driven by high prices for thermal coal and allowed the company to announce a $400 million share buyback.

What was the response?

The response to its half year results was very positive from brokers, with a large number reiterating their buy ratings and price targets that are notably higher than current levels.

One of those was Goldman Sachs. This morning the broker retained its buy rating and lifted its price target on the company’s shares to $3.90.

Based on the current Whitehaven share price, this implies potential upside of 24% for investors over the next 12 months.

And with Goldman forecasting dividends per share of 29 cents in FY 2022, which equates to a 9% yield, the total potential return stretches to 33%.

What did Goldman say?

Goldman said: “WHC is a compelling de-gearing and capital returns story in our view. We see the value accretive buyback (GSe NAV A$3.66/sh) as a change in capital allocation towards shareholder returns as the #1 priority, then brownfield expansions (Maules Creek to 16Mtpa) and lastly greenfield projects (Vickery).”

In addition, the broker highlights that the thermal coal price outlook is positive in 2022.

It said: “The thermal coal market remains tight due to supply side issues in Indonesia, Australian & Russia. WHC’s realised thermal coal prices will likely flip from a 15% discount to benchmark in 1H FY22 to in-line with benchmark or a premium in 2H FY22.”

“We upgrade our FY22/23/24 EPS by +27%/+122%/+106% after upgrading our coal price forecasts (thermal & met) by US$30/t for 2022&2023 due to ongoing market tightness,” Goldman concludes.

The post Whitehaven (ASX:WHC) share price tipped as a buy amid ‘compelling de-gearing and capital returns story’ 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 Bruce Jackson.

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The IGO Ltd (ASX: IGO) share price is in the green today as the exploration and mining company receives key support to acquire nickel producer, Western Areas Ltd (ASX: WSA).

The IGO share price is currently $12.37, a 1.23% gain.

Let’s take a look at what the explorer announced.

Key backing on nickel acquisition plan

IGO has received support from Andrew “Twiggy” Forrests’ Wyloo Consolidated Investments for the acquisition of Western Areas.

Wyloo has 31,509,769 shares in Western Areas, equating to a 9.8% stake in the company. As part of the deal, Wyloo will vote in support of the acquisition.

Wyloo has also agreed not to acquire or dispose of any shares prior to the scheme implementation. Wyloo is a wholly-owned subsidiary of Wyloo Metals, which is a business division of Twiggy’s Tattarang Group.

The details of the $1 billion takeover were shared with the market in December. The Western Areas board is recommending that shareholders vote in favour of IGO acquiring a 100% stake in the company for $3.36 per share.

Commenting on the announcement today, IGO CEO Peter Bradford said: “Our transaction to acquire Western Areas is on strategy and a sensible consolidation of Western Australian nickel production assets.”

Perpetual Limited (ASX: PPT), which owns 14.7% of Western Areas shares, has previously indicated its intention to vote in favour of the nickel acquisition.

Deal to study nickel processing opportunities

In a separate deal, IGO and Wyloo Metals have agreed to study nickel downstream processing opportunities in Australia. IGO will fund 70% of the study and Wyloo Metals will cover 30% of it.

After the study is complete, the companies may form a joint venture to build a nickel downstream processing facility.

Commenting on this new nickel study, Bradford said:

Looking forward, our agreement with Wyloo Metals to investigate and, if economically feasible, advance
development of a downstream nickel processing facility represents a great opportunity to progress Australia’s
relevance in the battery metals supply chain.

IGO and Wyloo Metals have each had an aspiration to evaluate the potential for downstream nickel processing in Australia and our joint initiative is a step towards realising the ambitions of both companies.

IGO share price snapshot

The IGO share price has surged by 80% over the past year. In 2022, the shares are up by around 4%. For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) has returned around 5% over the past year.

IGO has a market capitalisation of roughly $9.25 billion based on today’s share price.

The post IGO (ASX:IGO) share price lifts as Twiggy greenlights nickel acquisition appeared first on The Motley Fool Australia.

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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 Bruce Jackson.

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Are ASX 200 mining shares at the start of another supercycle? This is the question on the minds of many investors as commodity prices have skyrocketed in response to the pandemic.

While it’s difficult to say for certain, there are a number of factors indicating that this could be the case. Some analysts are already comfortably labelling the coming decade as the fifth supercycle in history for resources.

Let’s take a closer look at what defines a supercycle and whether or not ASX mining shares are poised for more growth.

What is a commodity supercycle?

Before we get ahead of ourselves, let’s understand what characterises a commodity supercycle.

A commodity supercycle is a prolonged period of time where commodity prices experience significant increases. This is driven by a structural shift in the supply and demand dynamics, which plays out across a number of years.

Across the span of 150 years, four supercycles have taken place. All of these were a result of a seismic change in demand following an evolution in how and what we use materials for.

In history, supercycles have occurred during periods such as the industrial revolution. This saw a step change from large-scale production of goods to mass production (think Henry Ford).

Prices of the desired commodities push higher to spur on an increase in supply, leading to the expansion of mining operations.

The mining companies that manage to provide supply into these booming periods are often handsomely rewarded. As an example, ASX 200 constituent, BHP Group Ltd (ASX: BHP) posted an annual profit of A$22.46 billion in 2011 — this was during the last mining boom.

Prior to FY21, the best the mining giant could muster up since 2011 was A$15.1 million in net profit after tax in 2012.

Are ASX 200 mining shares set for another boom?

Now that we have an understanding of what is involved in a supercycle, are we staring at the beginning of the next one? Based on the insights from analysts, it seems there’s a chance we very well could be.

Last month, analysts at Goldman Sachs shared their belief in a new long-term bull market for commodities. In fact, head of global commodity research, Jeffrey Currie said, “[…] there has rarely been a better time to add commodities to a portfolio […]”

Furthermore, the decarbonisation trend has been highlighted by experts as a potential heavy lifter in demand for materials.

While Janus Henderson Group (ASX: JHG) portfolio manager, Tim Gerrard, prefers to steer away from calling it a ‘supercycle’, he does see a structural shift playing out from environmental pressures.
Sharing his comments in an interview with Livewire, Gerrard said:

Demand for materials to make the world a better place to live is driving change globally. Whether it is satisfying the need to decarbonise by electrification, replacing plastics with paper products that are renewable and biodegradable or developing more sustainable animal nutrition – the need for resources is very diverse and growing rapidly.

Demand has already been out of balance with supply for many commodities since the beginning of 2020. As shown in the chart above, prices for the likes of lithium, aluminium, and nickel have skyrocketed in response.

What’s the verdict?

If the trend continues, ASX 200 mining shares could be set for a massive windfall over the years to come. Despite this possibility, the performance of these companies has been patchy over the last year.

• BHP Group – down 1.7%
• Fortescue Metals Group Limited (ASX: FMG) – down 20.6%
• Mineral Resources Limited (ASX: MIN) – up 23.4%
• Pilbara Minerals Ltd (ASX: PLS) – up 173.6%

This suggests, supercycle or no supercycle, selecting the right ASX 200 mining shares will be paramount to investor success.

The post What is a supercycle and are ASX 200 mining shares at the start of one? appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler 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 Bruce Jackson.

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Wesfarmers Ltd (ASX: WES) shareholders might be feeling a bit bruised this week after the share price tumbled on the release of the company’s half-year earnings.

However, there’s plenty to look forward to. Namely, Wesfarmers’ upcoming interim dividend.

While it might be smaller than usual, it puts the company in a decent yield position.

Let’s break down what investors should know about their upcoming pay day.

What’s the deal with Wesfarmers’ interim dividend?

The Wesfarmers share price tumbled yesterday, and part of its slump might have been brought on by the announcement of its interim dividend.

The conglomerate will be paying out 80 cents per share for the 6 months ended 31 December 2021. That’s 9% lower than last year’s interim dividend for financial year 2021.

Additionally – discounting its dividend for the first half of financial year 2020 – it represents the smallest interim dividend paid by Wesfarmers since 2013.

The lower dividend came after Wesfarmers’ after-tax profits tumbled 14% over the first half.

The company’s suffering was mainly brought on by the outbreak of the COVID-19 Omicron variant. It caused notable supply chain issues and staff shortages.  

What are the positives?

There are positive ways of looking at the company’s latest payout, though.

As usual, Wesfarmers’ dividend will be fully franked – meaning, it could benefit some investors at tax time.

Also, it gives Wesfarmers a trailing dividend yield of 3.3% – taking into account this new interim dividend and the final dividend it paid for financial year 2021.

The key dates excited investors will want to look out for are as follows:

• Wesfarmers will trade ex-dividend on 22 February

It’s likely the Wesfarmers share price will fall on the company’s ex-dividend date.

That’s because traders who buy into the company from then on won’t be eligible for the payout.

The value of all ASX shares often falls in line with the value of the dividend being paid out.

•  Shareholders will receive their interim dividends on 30 March

Whether Wesfarmers investors have more to look forward to when the company releases its full-year results in August is yet to be seen.

Wesfarmers still hasn’t provided any guidance for financial year 2022. However, the company does expect continuing COVID-19 impacts in the second half.

The post Own Wesfarmers (ASX:WES) shares? Here’s all you need to know about its latest dividend appeared first on The Motley Fool Australia.

More reading

• Why Block, Domain, Telstra, and Wesfarmers shares are dropping
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• ASX 200 (ASX:XJO) midday update: Telstra, Wesfarmers, and Woodside report
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• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Brooke Cooper 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 owns and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Smartgroup Corporation Ltd (ASX: SIQ) share price is surging to a four-month high today. This comes after the company posted an increase in full-year profit despite the COVID-19 headwinds.

The salary packaging company’s shares are currently up 8.81% to $8.03 apiece after management gave investors a few reasons to cheer.

Smartgroup share price climbs as profit rises

Highlights of Smartgroup’s full-year CY 2021 results include:

• Revenue of $221.8m, up 3% on CY 2020
• Operating earnings before interest, tax, depreciation, and amortisation (EBITDA) of $103.0m, up 8% on CY 2020
• Net profit after tax adjusted for amortisation (NPATA) up 7% to $69.5 million
• Net operating cash flow of $78.3 million, representing 113% of NPATA
• Net cash of $3.6m at year-end
• Fully franked final ordinary dividend of 19 cents per share (cps)
• Fully franked special dividend of 30 cps

Bigger margins despite cost pressures

It is not an easy task to expand profit margins in this climate. But supply chain disruptions from the pandemic and inflationary pressures failed to offset the cost savings from the company’s efficiency drive.

What is helping Smartgroup deliver good results is also the extra circa 17,000 salary packaging customers it secured during the year. Around half of them were introduced from a new healthcare sector client.

The company also boasted it had a 100% success rate in renewing or extending its top 20 contracts. This includes its biggest client, the Department of Defence.

Nearly all of Smartgroup’s clients are from stable and defensive sectors such as health, education, not-for-profit, and government.

Smartgroup also highlighted its strong net operating cash flow of $78.3 million which is even bigger than its NPATA figure.

It’s reassuring to have a strong balance sheet during these volatile times. The group has no net corporate debt, and its business model doesn’t need much capital to run.

What else?

The company isn’t totally immune from the impact of COVID. Delays in getting new vehicles continued to push out settlement timeframes for novated leasing vehicles. The number of open vehicle leases at 31 December 2021 is up 152% to the same time last year.

It’s a case of supply not keeping up with strong demand. Smartgroup noted that its novated leasing leads are up 8% in the first few weeks of 2022 versus the previous corresponding period.

But in the grand scheme of things, that’s not a bad problem to have.

Dividend delight for shareholders

The company is paying a juicy special dividend that’s on top of its bigger final dividend.

Management declared a final dividend of 19 cps, which is 8.6% ahead of last year, and a 30 cps special payout. This brings total dividends for the year to 72 cps. Both distributions are fully franked.

The dividends are payable on 23 March 2022, with a record date of 9 March 2022.

Commentary from management

Speaking on the results driving the Smartgroup share price, chairman Michael Carapiet said:

Smartgroup has continued to prove its resilience, withstanding the ongoing impacts of COVID-19 and delivering strong operational results.

The company generates high-quality earnings from a diversified customer base operating in growing sectors and with relationships based on long-term contractual arrangements.

Smartgroup CEO Tim Looi added:

I am not only pleased with our strong financial results this year but am also positive about the foundations our Smart Future program has built for future EBITDA and business growth.

In the first few weeks of trading in 2022, our novated leasing leads are up by 8% compared to the same period in 2021. Our key digital deliverables from Smart Future are on track and our investments in people, processes, and technology are delivering results that will continue through CY 2022.

Smartgroup share price snapshot

The Smartgroup share price has risen almost 9% over the past 12 months. It is also up 3% since the start of the year.

For comparison, the All Ordinaries Index (ASX: XAO) is up around 5% in the past year and is down almost 4% this year to date.

The post Smartgroup (ASX:SIQ) share price jumps 9% as full-year profit defies headwinds appeared first on The Motley Fool Australia.

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Motley Fool contributor Brendon Lau 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 owns and has recommended SMARTGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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