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The Seafarms Group Ltd (ASX: SFG) share price is falling sharply today as the company announced its half-year report late on Friday. The aquaculture company also released a market update.

The Seafarms share price was trading down 5.68% at 8.3 cents at the close of market today.

Why is the Seafarms share price sinking?

In its release, management said that the overall financial performance for the period reflected the company’s investment in pursuing its expansion in aquaculture operations. As such, Seafarms reported a large decline in revenue, and its net loss widened.

For the six months ending 31 December 2020, Seafarms reported revenue of approximately $14.937 million (down 30.7%) and a net loss of $12.8 million. The results reflect the cash contributions of Queensland operations while fully expensing all Project Sea Dragon (PSD) development costs.

The loss was also affected by a significantly reduced pond stocking in response to market uncertainty and COVID-19. In regards to PSD, the high level of required investment to develop the plant and train staff is proving expensive, with total costs coming in at more than $138 million to date.

As a result of the reduced pond stocking, total production for the period was down 47% from 1H FY20. Coming in at 321 tonnes. This reduction in stocking drove structural change across Queensland operations.

The company advised its cash balance reduced from $6.466 to $5.523 million across the two periods.

Project Sea Dragon

Seafarms is seeking to transform itself from Australia’s largest prawn producer into a low-cost global producer. In doing this, it is continuing to progress Project Sea Dragon in Northern Australia.

While not providing specific details on PSD, Seafarms stated that the project was ‘shovel ready’:

PSD is a world-class industrial-scale Tier 1 project with an operating life of 90 years which will be developed and constructed in stages with production ponds located at Legune Station in the Northern Territory. 

Once completed, the company said PSD would target high-quality year-round volumes for export markets and have a production capacity of up to 150,000 tonnes of prawns.

Looking ahead

Seafarms provided an outlook in its report, outlining its expectations for 900 tonnes of production this year. This is in line with the reduced stocking strategy for FY2021.

Furthermore, the company will look to Japan and Europe for investment in its sea dragon project.

More reading

• Why the AppsVillage (ASX:APV) share price soared 19% today
• Shriro (ASX:SHM) share price tumbles 7% despite profit surge
• Is it time to buy these 2 hot ASX healthcare shares?
• Where to next for the A2 Milk (ASX:A2M) share price?
• Here’s why the Electro Optic (ASX:EOS) share price jumped 19% today

Motley Fool contributor Daniel Ewing 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.

The post Why is the Seafarms (ASX:SFG) share price sinking 5% today? appeared first on The Motley Fool Australia.

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The AppsVillage Australia Ltd (ASX: APV) share price was sent soaring today following a capital raise announcement. During late-afternoon trade, the software-as-a-service (SaaS) solutions provider’s shares were up 23.8% before closing the day up 19% at 13 cents per share.

Let’s take a closer look and see what AppsVillage announced.

What’s driving the AppsVillage share price higher?

The AppsVillage share price is firmly in the green today as investors appear excited about the company’s latest prospects.

According to its release, AppsVillage reported a number of updates in regards to raising funds to execute its growth strategy.

The company stated that it has successfully secured binding commitments from existing institutional investors through a share and option placement.

Offered at a price of 11 cents apiece, the company issued 5,454,546 ordinary shares to raise $600,000. The new shares will be allotted on this week on Friday 5 March. In addition, those investors who participated in the placement also have an attached option of 1 share for every 2 shares received. The issue is available at nil price, exercisable at 13.5 cents expiring on 25 February 2024.

Furthermore, the company revealed that it has completed the directors’ investments of $200,000 as announced last August following shareholder approval. AppsVillage issued 1,339,286 ordinary shares to non-executive chair Bahram Nour-Omid for $150,000. The remaining $50,000 came from non-executive director Andrew Whitten for the allotment of 446,429 ordinary shares.

Pleasingly, AppsVillage was granted conditional approval to list on the TSX Venture Exchange (TSXV) (Toronto Stock Exchange). As part of the dual listing process, the company plans to raise a minimum of CA$5 million to satisfy the usual standard conditions.

So far, AppsVillage has received signed non-binding indicative term sheet commitments for a total amount of US$2.5 million. This came from an existing institutional shareholder and a new Israeli-based investment fund, whom were issued an indicative price of 16 cents each. The company noted that it is working with regulatory authorities to ensure it satisfies the listing criteria within the required 90-day period.

What did the head of AppsVillage say?

AppsVillage founder and CEO Max Bluvband hailed the strong backing, saying:

We are very pleased with the support we have received from our largest and existing shareholders and Directors of the Company as we continue to execute on our growth strategy. The proposed TSXV listing has generated good interest from potential investors and we look forward to completing that process in the near term.

The AppsVillage share price is down more than 34% since this time last year.

More reading

• Why is the Seafarms (ASX:SFG) share price sinking 5% today?
• Shriro (ASX:SHM) share price tumbles 7% despite profit surge
• Is it time to buy these 2 hot ASX healthcare shares?
• Where to next for the A2 Milk (ASX:A2M) share price?
• Here’s why the Electro Optic (ASX:EOS) share price jumped 19% today

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

The post Why the AppsVillage (ASX:APV) share price soared 19% today appeared first on The Motley Fool Australia.

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Shriro Holdings Ltd (ASX: SHM) shares were tumbling today after the consumer product distributor announced its 2020 full-year (FY20) results late on Friday. By today’s market close, the Shiro share price had fallen 6.7% to 97.5 cents. 

Let’s take a look at how the company has been performing.

Shriro share price falls on 180% profit increase

The Shriro share price was tanking today despite the company reporting that total revenue across the group increased by 11.2% to $191.3 million during FY20. Shriro markets and distributes a range of brands spanning kitchenware, range hoods, instruments, watches, and BBQs. Although revenue was subdued during the first half due to COVID-19 lockdowns, the second half rebounded strongly.

The company noted that with people unable to travel, more spending went towards household items. Shriro witnessed significant growth in some of its products, such as the Everdure by Heston Blumental range, which grew by 65.2% compared to the prior corresponding period. 

Shriro also continued with its cost-cutting strategy during the year. Operating expenses declined by 11.8%, excluding government subsidies. The combination of increased revenues and reduced costs led to a substantial lift in profit. The company noted a 180% increase in net profit after tax to $18.2 million.

As a result of the plentiful profits, Shriro declared a final dividend of 4 cents per share fully franked. 

Outlook 

In looking to the future, Shriro remains cautious of further COVID-19 lockdowns. However, the company intends to reinstate its marketing expenditure in line with previous years to support future growth.

Additionally, management expects to add additional resources to capture market share. This is assisted by the continuing success of the Omega range, which was rolled out to retailers in the first quarter.

Furthermore, Shriro foresees international BBQ revenue to grow significantly as brand awareness of the Everdure range continues to grow.

At the end of December, the company recorded no debt and $17.6 million of cash on hand. 

Foolish takeaway

Despite underperforming today, the Shriro share price has risen by around 19% year to date and by more than 40% over the past year. Based on the current share price, Shriro has a market capitalisation of around $93 million.

More reading

• Why is the Seafarms (ASX:SFG) share price sinking 5% today?
• Why the AppsVillage (ASX:APV) share price soared 19% today
• Is it time to buy these 2 hot ASX healthcare shares?
• Where to next for the A2 Milk (ASX:A2M) share price?
• Here’s why the Electro Optic (ASX:EOS) share price jumped 19% today

Motley Fool contributor Mitchell Lawler owns shares of Shriro Holdings Ltd. 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.

The post Shriro (ASX:SHM) share price tumbles 7% despite profit surge appeared first on The Motley Fool Australia.

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There are some ASX healthcare shares that are creating a lot of growth at the moment. Is it time to buy them?

Healthcare is one of the largest sectors on the ASX with a number of major companies with global earnings such as CSL Limited (ASX: CSL), Ramsay Health Care Limited (ASX: RHC) and Cochlear Limited (ASX: COH).

But there are some smaller ones that are expanding their market share and growing revenue:

Volpara Health Technologies Ltd (ASX: VHT)

Volpara is a medical technology business that provides clinical functions for screening clinics provide feedback on breast density, compression, dose, and quality, while its enterprise-wide practice-management software helps with productivity, compliance, reimbursement and patient tracking.

In the recent update for the third quarter of FY21 it said that it generated its largest-ever third quarter sales performance, with annual recurring revenue (ARR) reaching NZ$20.7 million at the time. Its average revenue per user (ARPU) at US$1.22 – up 5% from the second quarter.

Also, last month, the ASX healthcare share announced the acquisition of CRA Health. It’s described as an industry leader in breast cancer risk assessment spun out from Massachusetts General Hospital, a Harvard Medical School teaching hospital.

For Volpara, CRA adds ARR of over US$4 million, average revenue per user (ARPU) of around US$1.70 and coverage of around 6% of US breast screenings.

CRA’s software is integrated with the major electronic health record (EHR) and genetics companies.

Volpara will have ARR of around US$17.5 million and at least one product used in over 30% of US breast screenings.

Broker Morgans has a share price target for Volpara of $1.92, suggesting potential upside of close to 40%. The broker is a fan of the CRA acquisition and likes the increasing market share of women breast screenings.

Pro Medicus Ltd (ASX: PME)

Despite recent share sales by the founders of the business, the share price keeps heading higher.

Pro Medicus describes itself as a leading medical imaging IT provider. It offers a full range of radiology IT software and services to hospitals, imaging centres and health care groups worldwide. Visage Imaging is the key software offering.

The ASX healthcare share has been successfully winning many of the large contracts that have been on offer in both Europe and North America. This will drive earnings higher in the coming years, as they are multi-year contracts.

In the recent FY21 half-year result it reported that revenue rose 7.8% to $31.6 million, underlying profit before tax grew 25.9% to $18.8 million and net profit after tax (NPAT) grew 12.4% to $13.5 million. The earnings before interest and tax (EBIT) margin was around 59%, its cash reserve grew $7.5 million to $50.9 million and the interim dividend was increased by 16.6% to $0.07 per share.

Morgans is not convinced that the current Pro Medicus share price represents good value. It has a share price target of $41.30 for the ASX healthcare share. However, it said the result was strong as the business recovers from COVID-19 impacts.

The broker believes that Pro Medicus can generate earnings per share (EPS) of 42 cents for FY22, meaning it’s valued at 110x FY22’s estimated earnings.

More reading

• What you need to know about the CSL (ASX:CSL) dividend
• Top ASX shares to buy in March 2021
• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• 3 of the best ASX 200 results from last week
• 2 fast-growing small cap ASX shares to watch

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Pro Medicus Ltd. and VOLPARA FPO NZ. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd., Pro Medicus Ltd., Ramsay Health Care Limited, and VOLPARA FPO NZ. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is it time to buy these 2 hot ASX healthcare shares? appeared first on The Motley Fool Australia.

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It seems like the A2 Milk Company Ltd (ASX: A2M) share price has been left out to spoil. The last 9 months have been devastating for the company, as pantry destocking and weak China-related sales have seen its growth turn backwards. The A2 Milk share price has followed suit, falling close to 50% across the same period.

Here’s a look at A2’s recent half-year results, and what broker Bell Potter thinks could be in store for the company’s share price.

A2 Milk’s recent performance

A2 Milk’s half-year results weren’t pretty. The company’s growth metrics across the board went backwards in an alarming double-digit fashion. Revenue, operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) and operating net profit after tax were all down a respective 16%, 33%, and 36%. 

The company’s lease-adjusted operating cash outflow came in at NZ$10.8 million, compared to the $159.9 million inflow in 1H20. This marks the company’s first negative operating cash flow since 1H16. 

There were some small positives throughout the half-year results. This included strong growth within its liquid milk segment, growing 16.3% to $86.9 million with a record Australian market share of 11.7%. Liquid milk now represents 18% of the company’s earnings, compared to 13% in the half ending June 2020. 

Elsewhere, the company lifted its Mother & Baby Store distribution points in China to 22,000 from 19,100 at FY20. Its rising footprint in China has translated to $213.1 million in sales, up 45.2%. 

The US remains a focal point for A2, with distribution points expanded to 22,200 points from 20,300 at FY20. 

Despite the small wins, the company’s infant nutrition channels drive a majority of its earnings growth, which slumped from $765.7 million in 2H20 to $526.1 million in 1H21.

Looking ahead, FY21 revenue was forecast to be approximately NZ$1.4 billion with an EBITDA margin of 24–26%, implying EBITDA of NZ$336 million to $364 million. This guidance was also heavily caveated as relying on a material recovery in the last quarter of FY21. 

Bell Potter’s A2 Milk share price target 

Bell Potter updated its A2 Milk share price target on 25 February to $8.65, which represents a downside of 3% to its share price at the time of writing.

Into this share price target, the broker incorporated A2’s holding of Synlait Milk Ltd (ASX: SM1), a value for the expected upside in China based on projected stockists and sell-through rates, and a value for the US opportunity.

The broker commented that “A2 Milk is by no means cheap, neither is the sector and to a degree the material under performance of A2 Milk reflects this.” 

More reading

• Top brokers name 3 ASX shares to sell next week
• Do brokers think the A2 Milk (ASX:A2M) share price is a buy or sell?
• 3 ways A2 Milk (ASX:A2M) is planning a share price recovery
• ASX 200 rises 0.8%, A2 Milk sinks, Zip drops
• Why a2 Milk, Service Stream, TPG, & Zip shares are tumbling lower

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. 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 Electro Optic Systems Holdings Ltd (ASX: EOS) share price has surged nearly 19% in today’s trading session. By the market’s close, the Electro Optic share price was trading at $5.29.  

Let’s take a look at what’s been happening for the defence and aerospace company.

What fuelled the Electro Optic share price today?

The Electro Optic share price has bounced strongly in today’s trading session. The company’s shares were under pressure late last week after it reported its full-year financial results for FY20.

Apart from a Change of Directors Interest notice, Electro Optic did not release any highly sensitive news today. As a result, we can only posit that investors are reinterpreting the company’s financial results or regarding the fall in its share price as a buying opportunity.

The Electro Optic share price was down more than 9% at one point on Friday, before recovering slightly.

How has the company been performing?

For FY20, Electro Optic Systems recorded a net loss after tax of $25.6 million for the full year. The defence technology company cited the COVID-19 pandemic as having a widespread impact on its operations.

The company noted that travel bans had caused major disruptions to its supply chain. In addition, lower volumes and split shifts reduced efficiencies which resulted in production running at sub-optimal levels.

As a result, investment into inventory resulted in a negative operating cash flow of $109 million for the full year.

Despite reporting a net loss, Electro Optic did highlight a few positives for the period.

The company delivered a 9% increase in revenue to $180 million from ordinary activities. In addition, Electro Optic noted that $40 million in revenue will be pushed into FY21 due to delivery issues in FY20.

The company also cited its strong capital position, with Electro Optic holding $65.9 million in cash and cash equivalents.

Foolish takeaway

Electro Optic Systems specialises in the development, manufacture and sale of various technology platforms. The company operates in three different sectors being defence, space, and communications.

Defence represents the largest revenue segment for the company, comprising more than 80% of its revenues in FY20. 

Electro Optic did not provide guidance for 2021, however the company’s management noted that trading should be more predictable than during 2020.

More reading

• The Electro Optic (ASX:EOS) share price slumps 5% as net profits plummet
• Why the Etherstack (ASX:ESK) share price will be on watch today

Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s why the Electro Optic (ASX:EOS) share price jumped 19% today appeared first on The Motley Fool Australia.

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The TPC Consolidated Ltd (ASX: TPC) share price soared 23.8% higher today to close the trading day at $2.60 a share.

With nothing new released to the market today, let’s look at the energy company’s half-year (1H21) report released after the close of trade on Friday to see what might be moving the TPC share price today.

Half-year financial highlights

The company reported a 0.5% revenue gain with 1H21 revenue totalling $44.7 million.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was $6 million for the 1H21 period. This is a 22.4% improvement compared to $4.9 million in the previous corresponding period (pcp).

TPC posted an earnings per share (EPS) of 33.80 cents for 1H21 compared to 21.96 cents for 1H20.

The interim dividend for the period was 8 cents a share.

Net profit after taxes (NPAT) zoomed up 54.1% from $2.5 million posted at the end of 1H20 to $3.8 million at the end of 1H21.

Current assets also came in higher, jumping from $9.7 million for 1H20 to $28.6 million for 1H21, a 51.3% gain.

As of 31 December 2020, cash and bank deposits were $8.8 million, up 186.4% compared to pcp.

Looking ahead

In its half-year report, the company released the following statements regarding its outlook.

The half-year started off being especially uncertain with the onset of COVID-19. We were monitoring business activities both internally and externally carefully. Our main concern was the ability of our customers to continue to pay their energy bills in light of business closures and employment uncertainties.

We are pleased to report that, as a result of our diligence, the net impact was manageable although we continue to be cautious until full return to normalcy; post-COVID-19 environment.

TPC further noted that the company continued to make headway in the renewable energies market. It expects to share its progress with the market later this year.

Revenues and earnings are both believed to be on track to meet investor expectations.

TPC share price snapshot

The TPC share price has gained 100% over the past year and has hiked up 60.9% in the past month alone.

The company’s approximate market capitalisation is $23.9 million, with an estimated 11.4 million shares outstanding. 

More reading

• Why did the Zip (ASX:Z1P) share price rocket 43% in February?
• Here’s why the Raiz (ASX:RZI) share price is soaring today
• Why the AJ Lucas (ASX:AJL) share price rocketed 120% today
• Titomic share price (ASX:TTT) slides lower despite positive update
• Why the EMvision (ASX:EMV) share price is going nowhere

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

The post Here’s what sent the TPC (ASX:TPC) share price powering 23% higher today appeared first on The Motley Fool Australia.

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The Zip Co Ltd (ASX: Z1P) share price was in fantastic form last month.

In fact, with a gain of 43%, the buy now pay later (BNPL) provider’s shares were the best performers on the S&P/ASX 200 Index (ASX: XJO) over the period.

Why did the Zip share price rocket 43% in February?

There were a number of catalysts for the strong performance by the Zip share price in February.

The first was the IPO of rival BNPL provider Affirm in the United States in January. That IPO was so successful it appears to have driven a re-rating of a number of BNPL shares like Zip and Sezzle Inc (ASX: SZL).

In addition to this, speculation that the company could be looking at a secondary listing in the United States got investors excited. Not only would this allow US fund managers easier access to its shares, it would make it easier for Zip to access capital markets when necessary.

What else is driving its shares higher?

But perhaps the biggest driver of the Zip share price outperformance in February was its second quarter and half year update.

Investors were fighting to get hold of the company’s shares following the release of its second quarter update at the end of January.

That update revealed that its US QuadPay business has been growing at an explosive rate even though competition is increasing from the likes of Shopify and PayPal.

For the three months ended 31 December, QuadPay recorded a 217% increase in second quarter transaction volume to $673.1 million. This was underpinned by a 180% lift in customer numbers to 3.2 million and a 655% jump in merchants to 8,400.

Can the Zip share price go higher?

The good news is that one broker is tipping the Zip share price to continue its remarkable run in March.

According to a note out of Morgans from last week, its analysts have retained their add rating and lifted their price target on its shares to $12.10.

Based on the current Zip share price, this price target implies potential upside of 10.5% over the next 12 months.

More reading

• Here’s how much Afterpay (ASX:APT) rival Klarna is worth now
• ASX 200 up 1.5%: Afterpay & Zip jump, Fortescue tumbles
• BNPL providers like Afterpay (ASX:APT) set for increased regulation
• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• These were the best performing ASX 200 shares in February

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

The post Why did the Zip (ASX:Z1P) share price rocket 43% in February? appeared first on The Motley Fool Australia.

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The Raiz Invest Ltd (ASX: RZI) share price is climbing higher today. This comes after the mobile-first financial services platform provider announced a new fee structure for customers.

In afternoon trading, the company’s shares are up 4.85% to $1.73. Earlier today, the Raiz share price reached an intraday high of $1.80.

What are the fee changes?

Australian customers of Raiz might notice an increase in fees from 1 April 2021 for the micro-investing platform. However, not all of Raiz’s now over 340,000 active customers will be impacted.

If you use the company’s recent “Custom” portfolio, you can breathe a sigh of relief. The portfolio launched in January will retain its existing fee of $4.5/month on balances below $20,000, or 0.275% p.a. on balances over $20,000.

The same goes for anyone with over $15,000 in any of the standard portfolios offered by Raiz. This includes conservative, moderately conservative, moderate, moderately aggressive, aggressive, emerald. On the other hand, if you hold less than $15,000 in your standard portfolio, fees will increase to $3.50/month.

Further, the Sapphire portfolio, which offers investors a 5% exposure to Bitcoin (CRYPTO: BTC), will experience a hike to $3.50/month as well.

Quality comes at a price

Largely, the reason given for the elevation in fees is an increase in costs associated with providing the Raiz platform.

Raiz Invest Group CEO and Managing Director, George Lucas, commented:

There is an increasing corporate governance cost associated with delivering financial products and services that requires ongoing investment in technology and resources, such as people. This is important to ensure we are compliant, protect our customers’ data and investments and are constantly meeting (or exceeding) our customers’ expectations

Mr Lucas went on to explain the criticality of continuing to provide an exceptional experience. Corporate governance, risk management, and oversight seem to be the pillars of the justification.

“A fee increase is always a very considered decision, and, despite this latest increase I believe our fees remain competitive for the suite of cutting-edge features and options we provide,”

Raiz share price performance

It appears investing in the investment platform itself this last year would have been more prosperous than in its portfolios. The Raiz share price has performed exceptionally in the last 12 months, returning 138%. Most of the company’s portfolios are a diversified mix of index exchange-traded-funds (ETFs), alongside bonds and money markets. Hence, the diversification associated with risk management tends to lead to lower but more sustainable returns. 

More reading

• ASX 200 Weekly Wrap: Friday carnage ruins last week of ASX earnings
• Aussie investors are now buying more Bitcoin than gold
• How Tesla’s (NASDAQ:TSLA) Elon Musk just lost $19 billion
• Raiz (ASX:RZI) share price sinks after half-year result
• ASX 200 Weekly Wrap: ASX lower despite bumper dividends

Mitchell Lawler owns shares of Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Bitcoin. 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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AJ Lucas Group Limited (ASX: AJL) shares have been among the best performers on the ASX today on the back of the company’s FY21 first-half (H1 FY21) results. By the market’s close, the AJ Lucas share price had risen an astonishing 120% to 5.5 cents. In earlier trade, AJ Lucas shares surged by as much as 380% to 12 cents before retracing to their current level. 

Let’s take a closer look and see what’s driving the drilling services company’s shares.

What pushed the AJ Lucas share price higher?

The AJ Lucas share price rocketed higher in mid-afternoon trade as investors appeared upbeat with the company’s latest performance.

According to its release, AJ Lucas reported a drop in revenue, but a significant gain in net profit due to a stronger domestic market.

For the six months ending 31 December 2020, AJ Lucas delivered total group revenue of $61.3 million. This represents a fall of 20.9% from the prior corresponding period, driven by lower mining operations resulting from COVID-19.

However, its Australian operations grew over the first-half to offset the revenue loss. In addition, AJ Lucas achieved reduced losses from its United Kingdom operations, an R&D-related tax benefit and lower finance expenses.

This, in turn, helped support the company’s bottom line in which it booked a net profit of $9.9 million. The overall result represented a $20.2 million turnaround from AJ Lucas’ reported $10.3 million loss at the end of December 2019.

Earnings before interest, tax, depreciation and amortisation (EBITDA) came to $15 million from the company’s entire operations. This reflected a 63.5.% jump over the H1 FY20 period in which EBITDA stood at $9.1 million.

Management noted that it is continuing to look for opportunities to strengthen its Australian segment. It’s hoping to further improve on earnings diversification, profitability, and future resilience.

The group closed the calendar year with cash and equivalents of $12.5 million, and $83.5 million of debt obligations.

Words from the CEO

AJ Lucas group CEO Brett Tredinnick hailed the strong scorecard for the first-half, saying:

The result reflected the strong operational performance of Lucas Drilling during the half despite revenue being impacted by COVID-related and other interruptions to clients’ operations.

The drop in revenue in the period was more than offset by the increase in earnings resulting from a better mix of more technical, higher yielding drilling as well as the various operational and corporate efficiency measures taken. The Group is now better positioned to maximise growth opportunities and better withstand any possible future shocks.

The Board and management remain confident in the continued performance of the company’s drilling operations and are buoyed by a recent increase in levels of tender activity.

Outlook

Looking ahead, AJ Lucas advised that it is continuing to see its strong performance run into the second half. The company stated that cash generated from the drilling division will be used to service and reduce its debt. Furthermore, AJ Lucas will seek to explore other business opportunities where it can grow its revenue base.

The AJ Lucas share price is up over 20% since this time last year.

More reading

• Here’s why the Raiz (ASX:RZI) share price is soaring today
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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