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The Ampol Ltd (ASX: ALD) share price is down 2.45% at $25.85 in morning trade after the company released its full-year results.

The petroleum company (previously known as Caltex) reported that the coronavirus pandemic had a material impact on Australian fuel demand, thus delivering a hit to performance.

Here’s a closer look at the results driving the Ampol share price this morning.

Results highlights at a glance

For the full year ended 31 December 2020, Ampol reported group earnings before interest and taxes (EBIT) on a replacement cost basis (RCOP) of $401 million. This compares to $607 million for the same period in 2019.

Total Australian fuels sales volumes were 13.6BL, a 17% drop compared to 2019. However, international volumes grew by 36%, totalling 6.5BL.

The total declared dividends for 2020 is 48 cents per share (fully franked).

Commenting on the annual performance, Ampol CEO Matt Halliday said:

Ampol has navigated a tough operating environment, with sustained weakness in refining margins, ongoing government restrictions impacting travel and aviation in particular, and broad economic weakness impacting demand throughout the year.

Despite the many challenges and disruptions faced, I am pleased with our progress in executing our strategy and delivering on our promises to shareholders.

In 2020, we released significant capital through our convenience retail property transaction, announced the return of capital to shareholders through our recently completed off-market buy-back, and delivered a subordinated notes issuance. We also commenced our rebrand to Ampol and we are well positioned to deliver on our targeted $195 million EBIT uplift by 2024.

Outlook for Ampol

The company advised that challenging market conditions had persisted during the early onset of 2021.

Ampol said the impact of COVID-19 on international travel had significantly impacted the demand for jet fuel. As a result, the fourth quarter of 2020 saw a 56% drop in demand compared to the prior corresponding period.

Demand for diesel fuel has remained steady during the challenging business environment, carried along by significant customer bases, including the mining industry.

Looking ahead, Mr Halliday added:

Heading into 2021, we remain focused on cost and capital efficiency and will continue to make decisions to improve returns and deliver growth to shareholders. Our refining review is ongoing, with an outcome to be communicated to stakeholders in 2Q 2021.

Snapshot of the Ampol share price

The Ampol share price has fallen 25.15% in the past 12-month period.

Ampol has a market capitalisation of $6.3 billion. There are presently 238.3 million shares outstanding.

More reading

• ASX 200 Weekly Wrap: Reality (and GameStop) finally hits ASX
• These were the worst performing ASX 200 shares last week
• Why Ampol, Flight Centre, Syrah, & Telix shares are dropping lower
• ASX 200 up 0.35%: Afterpay & Appen push higher, big four banks rising

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.

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Next Science Ltd (ASX: NXS) shares are pushing higher today on the back of the company delivering its full-year results for the 12 months ending 31 December 2020 this morning. The Next Science share price opened lower this morning at $1.21 but at the time of writing, has jumped 3.25% higher to $1.27.

What did the company report?

The Next Science share price is leaping higher this morning after the company released its results covering the 2020 calendar year, thus incorporating the most significant impacts of COVID-19 on its activities. Next Science reported that revenues came in at US$3.44 million, down 15% from 2019’s US$4.06 million.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 3% from 2019’s loss of US$11.13 million to a loss of US$11.49 million for 2020. Gross profits were US$2.92 million for 2020, down 17% from 2019’s US$3.91 million. Gross margins on sales came in at 85% though, down slightly on 2019’s 86%. Overall, expenses fell 2% for 2020 to US$14.4 million, down from 2019’s US$14.64 million.

As of 31 December 2020, Next Science reported it had US$15.3 million in net cash. That was assisted by the company’s recent capital raise.

Next Science told investors that revenue was held back by the COVID-19 pandemic, which resulted in a “shut down of elective surgeries and [the] closure of wound care clinics”. This reportedly hit sales of the company’s BlastX product especially hard, given sales were down 75% year on year. That was somewhat offset by lower expenses as a result of reduced travel expenditure and a reduction in staff headcount.

Despite this mixed bag of results, the Next Science share price is pushing higher as the company remains bullish on its future. Next Science highlighted that revenue in the quarter ending 31 December saw revenue growth return and sales that were 75% above the same quarter in 2019. The health care company advised investors that this run rate “is expected to continue in 1H 2021”.

What is Next Science?

Next Science is an ASX health care company that specialises in antimicrobial balms and solutions. It is currently the only company worldwide that has products approved to treat biofilm-based infections.

Next Science has three available products in the United States market, as well as regulatory approvals in several European countries, the United Kingdom and Australia. It has another product called XPerience that is set for launch in the first half of this year, pending approval from the US Food and Drug Administration (FDA).

Next Science share price snapshot

Over the past 12 months, the Next Science share price has fallen by nearly 34%. The company’s shares have increased 27% since their March 2020 low of $1.00. Based on the current Next Science share price, the company has a market capitalisation of around $150 million.

More reading

• The Next Science (ASX:NXS) share price is up 8% today. Here’s why

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Nexus Energy Limited. 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 Australian federal government will withdraw all advertising on Facebook Inc (NASDAQ: FB) in a move that could cost the platform tens of millions.

Last Thursday, the social media giant blocked viewing and sharing of all news for Australian users as retaliation to the government’s News Media Bargaining Code.

Over the weekend, health minister Greg Hunt declared his department would no longer spend ad dollars with the social media firm.

Then on Monday, finance minister Simon Birmingham told Radio National the ban would apply to all areas of the federal government.

“My expectation is that we will pull back from advertising while they undertake this type of terrible activity of pulling down sites inappropriately, seeking to exert power or influence over our democratic systems,” he said.

“We won’t tolerate that.”

According to the ABC, the federal government spent $42 million on digital ads in the 2019-20 financial year.

Using the Australian Competition and Consumer Commission’s guidance that about 25% of all digital ad spend goes to Facebook, this could mean the platform will end up tens of millions out of pocket.

How has it come to this?

Australia’s world-first News Media Bargaining Code is an attempt to induce digital platforms like Facebook and Alphabet Inc (NASDAQ: GOOG)’s Google to pay publishers for the content they provide.

Google had also threatened to pull its services from Australia during negotiations but has since relented and made revenue-sharing deals with News Corporation (ASX: NWS) and Nine Entertainment Co Holdings Ltd (ASX: NEC).

But Facebook last week hit the ‘nuclear’ button, in a sign of how worried it is about the precedent Australia might set for other larger markets.

The social media platform faced a public relations disaster soon afterwards, with its news-blocking code also censoring out emergency services pages.

“For the life of me I can’t understand why they go and block, you know, NSW Fire & Rescue or the Royal Children’s Hospital or access to 1800RESPECT which provides, you know, services and support to people in need,” treasurer Josh Frydenberg told 2GB on Friday.

“They were heavy-handed, they were unnecessary. I mean, the code hasn’t even come into law.”

The government and Facebook have confirmed they have resumed talks since the news blackout.

However, ministers such as Birmingham and Frydenberg have publicly stated they will not budge on the code as it currently stands.

“The government’s committed to it. It’s been work that we’ve had underway for 3+ years through the good work and analysis of the ACCC,” said Frydenberg. 

“It’s world-leading. The rest of the world is watching us. And our resolve is hardened.”

More reading

• Facebook news ban to devastate ASX: expert
• What ‘Facebook vs. The Rest’ means for you
• Facebook bans Aussies from sharing, viewing news
• Is eBay stock a buy?
• Nasdaq at record high! Here’s what it means for the ASX 200

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares) and Facebook. The Motley Fool Australia has recommended Alphabet (A shares) and Facebook. 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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At lunch on Monday the S&P/ASX 200 Index (ASX: XJO) is fighting hard for gains. The benchmark index is currently up 0.1% to 6,802.3 points.

Here’s what has been happening on the market today:

Costa full year results impress

The Costa Group Holdings Ltd (ASX: CGC) share price is flying higher today after smashing the market’s expectations with its full year results. For the 12 months ended 27 December, the horticulture company delivered an 11.2% increase in revenue to $1,164 million and a massive 108.4% jump in net profit to $59.4 million. Management advised that this was driven by strong demand and pricing. A recovery from domestic issues impacting the prior period also supported its performance. Analysts at Morgans were forecasting a $52.2 million net profit.

NIB delivers solid profit growth

The NIB Holdings Limited (ASX: NHF) share price is surging higher after it delivered solid half year profit growth. For the six months ended 31 December, the private health insurer reported a 1.1% decline in revenue to $1.3 billion but a 4.4% lift in underlying operating profit to $86.9 million. This reflects a 14.1% reduction in operating expenses to $172.1 million. On the bottom line, NIB posted a 15.9% jump in net profit after tax to $66.2 million. Morgans was forecasting an underlying operating profit of $82 million.

Macquarie swiftly upgrades guidance

The Macquarie Group Ltd (ASX: MQG) share price is charging higher today after it upgraded its guidance. This was just less than two weeks after issuing its guidance for a profit result slightly lower year on year. For the 12 months ending 31 March, Macquarie now expects its profits to increase ~5% to ~10%. The investment bank advised that extreme winter weather conditions in North America have significantly increased short-term client demand for its capabilities in maintaining critical physical supply across the commodity complex and particularly in relation to gas and power.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Monday has been the Costa share price with its 12% gain. This follows its full year results release. The worst performer has been the Reliance Worldwide Corporation Ltd (ASX: RWC) share price with a 7.5% decline. This morning the plumbing parts company released a very strong half year result but warned that its growth could moderate.

More reading

• Why Costa, Lovisa, OZ Minerals, & Tyro shares are racing higher today
• Here’s why the NIB (ASX:NHF) share price is storming higher today
• Why the Macquarie (ASX:MQG) share price is charging 4% higher
• Reliance Worldwide (ASX:RWC) share price in spotlight as it unveils 82% profit surge
• Costa (ASX:CGC) share price in focus after its results smash expectations

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 Reliance Worldwide Limited. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO and Macquarie Group Limited. The Motley Fool Australia has recommended NIB Holdings Limited and Reliance Worldwide 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 small-cap space erupted last week with the Province Resources Ltd (ASX: PRL) share price surging as much as 600% on its move to produce zero carbon-hydrogen.

While the Province Resources ship may have already left the port, here are three small cap ASX shares in the exploration and commodity space that have received a ‘speculative buy’ rating from broker Euroz Hartleys. 

Sovereign Metals Limited (ASX: SVM) 

Sovereign Metals has a 100% interest in the Kasiya project located in Malawi. Kasiya is a saprolite-hosted rutile deposit, otherwise known as an eluvial deposit. Rutile prices have been increasing recently.

Hartleys believes that Kasiya has all the hallmarks of developing into a significant rutile producer in the medium term. Based on the broker’s speculative assumptions, it seems possible the deposit could likely support a production size of 100 to 130 kt pa based on a 10mtpa plant. Despite the project’s medium to long term potential, the broker acknowledges its key risks, including project location (Malawi) and potential challenges in obtaining development capital. 

The broker maintains a target price of 60 cents which represents an upside of 42%. 

Tietto Minerals Ltd (ASX: TIE) 

Tietto Minerals continues to de-risk the development of its Abujar gold project, with the aim of becoming “West Africa’s next gold mine”. The company recently increased ownership in the project to 88% (at the mining stage) and pending its pre-feasibility study (PFS) results in the coming weeks, which will be the first look at the project’s economic parameters. 

Hartleys sees significant exploration upside with its current 3 million oz expected to grow. Ongoing drilling is improving resource confidence for optimised mine plans feeding into development studies. News flow from drilling is expected to be strong, and the PFS delivery a key milestone for the ultimate project development.

The Abujar PFS is due late in the first quarter of the calendar year 2021, with the study investigating a potential 3.5Mtpa open operation.

Hartleys coverage rates the company as a speculative buy with a target price of 70 cents per share or an upside of 89% to its current price. 

Legend Mining Limited (ASX: LEG) 

Legend Mining’s early metallurgical test work from the Mawson prospect within the Rockford project, Fraser Range in Western Australia, looks positive with high recoveries for copper and nickel.

Hartleys describes the project as catalyst rich, with a large and growing footprint auguring well for the next major discovery. 

The report cites that although the mineralised intrusive source has not yet been drilled out to economic status, this is just a matter of time. Based on the occurrence of high-grade massive sulphides within ultramafic intrusive rocks, net textures consistent with analogous major deposits and the presence of platinum group elements and gold.

The broker is ‘unwavering’ in its conviction with a speculative buy maintained and a target price of 30 cents.

Foolish takeaway

Small-cap ASX shares in the mining and exploration sector are fraught with risks as projects attempt to transition closer to producer status.

While Province Resources may have delivered eye-watering returns last week, investors who bought the top would have otherwise found a -40% hole in the pocket. 

More reading

• 4 ASX hydrogen shares powering forward in 2021
• Here’s why the Province Resources (ASX:PRL) share price has powered up 253% today

Motley Fool contributor Kerry Sun 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is edging ever so slightly higher. At the time of writing, the benchmark index is up a few points to 6,796.8 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are racing higher:

Costa Group Holdings Ltd (ASX: CGC)  

The Costa share price has jumped 9% to $4.37 after the horticulture company released a stronger than expected full year result. For the 12 months ended 27 December, Costa reported an 11.2% increase in revenue to $1,164 million and a 108.4% jump in net profit to $59.4 million. According to a note out of Morgans, it was forecasting a profit of $52.2 million, whereas the market consensus was for a profit of $48.1 million. Strong demand and pricing were key drivers of its growth.

Lovisa Holdings Ltd (ASX: LOV)

The Lovisa share price has surged 14% higher to $14.93. Investors have been fighting to get hold of the jewellery retailer’s shares since the release of its half year results last week. While those results were weak, its improving performance has caught the eye of investors and also analysts at Morgans. This morning the broker reaffirmed its add rating and lifted its price target significantly to $17.95. It is very positive on its global rollout.

OZ Minerals Limited (ASX: OZL)

The OZ Minerals share price has stormed 8% higher to $22.81. Last week analysts at Macquarie responded positively to the copper producer’s full year results. The broker retained its outperform rating and lifted its price target to $24.00. It feels its shares are attractively priced given its growth profile and current spot copper and gold prices.

Tyro Payments Ltd (ASX: TYR)

The Tyro share price is up 9% to $2.96 following its half year results release. Tyro reported a 13% increase merchant numbers to 36,720 and a 10% lift in transaction through its platform to $12.1 billion. This underpinned a 464% increase in EBITDA to $8.5 million. But perhaps the biggest positive was that it hasn’t experienced any material changes to its normal churn rates since its outages earlier this year. In addition, it revealed that net merchant applications remain at normal levels.

More reading

• Why the Tyro Payments (ASX:TYR) share price is shooting higher
• Costa (ASX:CGC) share price in focus after its results smash expectations
• 5 things to watch on the ASX 200 on Monday
• Why Cochlear, Goodman, Lovisa, & Whispir shares are surging higher
• Lovisa (ASX: LOV) share price rockets 19% on half year results

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 Tyro Payments. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. 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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Tyro Payments Ltd (ASX: TYR) shares are shooting higher today after the payment solutions provider released its results for the financial half year ending 31 December (H1 FY21). At the time of writing, the Tyro share price is trading 6.62% higher at $2.90.

What did Tyro Payments report?

The Tyro share price is surging higher in morning trade after the company reported a 13% increase in the number of merchants using its payments solutions. Merchant numbers reached a record high of 36,720 in H1 FY21, up from 32,450 in the first half of the 2020 financial year.

Tyro also revealed it had achieved a new record high in the transactions processed by its merchants, up 10% to $12.1 billion.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at $8.5 million. That’s up 464% from the $1.5 million reported in H1 FY20.

Revenue for the half was $114.8 million, an increase of 2.1% from the previous corresponding period.

Statutory net profit after tax (NPAT) was still negative, but losses narrowed by 82% to $3.4 million, down from $19.2 million in the previous corresponding half.

Commenting on the results, Robbie Cooke Tyro CEO said:

We are proud to have processed a record $12.1 billion in transactions for our merchants. This was achieved despite the continuing challenges from COVID and unpredictable lockdowns. Our merchants saw solid growth in the half, while our market leading solutions continued to attract new merchants to our platform.

Looking ahead, the company remains focused on repairing any lingering damage from its terminal connectivity failures in January this year.

Cooke stated:

Whilst we continue at pace with our planned initiatives to drive growth and build our ecosystem centred around payments and enhanced by value adding features and products, our first priority over the next six months is to do all that we can to rebuild trust with those of our merchants impacted by the terminal connectivity issue triggered on 5 January.

He added:

We are now building a ‘failover’ solution. This will see us provide all our merchants with a dongle solution in combination with their standard terminals as an extra level of redundancy – this is an industry first move.

Tyro share price snapshot

The Tyro share price has yet to fully recover from the heavy hit it endured during the wider COVID-19-driven market rout during February and March last year. Over the past 12 months, Tyro shares are down by nearly 29%. By comparison, the All Ordinaries Index (ASX: XAO) is flat over that same period.

With today’s intraday gains taken into account, year to date, the Tyro share price is down by around 14%.

More reading

• Should short selling be banned?
• Short sellers doubling down on these ASX stocks despite the GameStop saga
• The Tyro (ASX:TYR) share price has crashed over 20% in the past month
• Here’s why the Tyro (ASX:TYR) share price is in focus today
• Why IDP Education, Lake Resources, Mach7, & Tyro shares are shooting higher

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Tyro Payments. 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 Bapcor Ltd (ASX: BAP) is down around 1% after announcing news about its CEO.

Bapcor is a large auto parts business with a number of different divisions including Burson and Autobarn.

Here’s what the company announced about its boss.

Bapcor CEO extends his tenure

The Bapcor board announced that the CEO and managing director Darryl Abotomey has agreed to extend his tenure to 31 October 2023. He has been the leader of Bapcor since September 2011.

The Bapcor Chair, Margie Haseltine, said:

We are delighted that Darryl is extending his leadership of Bapcor through to October 2023. Under Darryl’s guidance Bapcor has been one of the top performing ASX listed companies since it listed in April 2014, going from strength to strength, year after year.

Bapcor has a clear 5-year strategic plan including specific targets, with many of the projects underway and which will be brought to fruition during Darryl’s remaining tenure.

What else has been happening recently?

Last week the auto parts business announced its FY21 half-year result.

Bapcor said that along with strong financial performance, it has continued to progress major projects that will underpin the group’s future success. It said it’s in a very solid financial position and capable of capitalising on opportunities as they arise.

The auto parts business reported that its revenue from operations grew 25.8% to $883.6 million. Pro forma earning before interest, tax, depreciation and amortisation (EBITDA) went up by 36.5% to $145.6 million, pro forma net profit after tax (NPAT) grew by 54% to $70.2 million and pro forma earnings per share (EPS) rose 28.9% to 20.7 cents.

Whilst the net debt grew from $109.2 million to $120.4 million, the leverage ratio improved from 2.3x to 0.6x.

The Bapcor board decided to declare a fully franked interim dividend of 9 cents per share, up 12.5% compared to the prior corresponding period.

Bapcor said that it continues to have avenues to drive the performance of the business including further network growth, realising operational efficiencies and expansion of the own-brand product range. It also continues to work on its new distribution centre in Victoria as well as its online capabilities.  

More reading

• 2 ASX 200 shares to buy for growth
• Bapcor (ASX:BAP) share price stalls despite record results
• 2 ASX 200 shares to buy for growth
• 2 ASX shares to own according to fund managers
• 3 compelling ASX shares rated as buys by brokers

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. 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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Amaysim Australia Ltd (ASX: AYS) shares are edging higher following the release of the company’s half-year results. At the time of writing, the Amaysim share price is trading 0.65% at 77.5 cents. 

The financial results for the half year ending 31 December (H1 FY21) are likely to be the last from the company, as it looks to delist from the ASX at the end of March.

What did the company report?

The Amaysim share price is pushing higher after this morning’s update in which the company summarised the sale of its energy business to AGL Energy Limited (ASX: AGL). The sale occurred on 30 September last year for an all cash consideration of $115 million.

A month later, on 2 November, Amaysim took a step towards winding up the company when it announced the intent to sell its mobile segment to Optus Mobile for $250 million. That announcement saw the Amaysim share price leap more than 10% on the day.

On 21 January, shareholders voted in favour of the mobile segment sale, which was completed on 1 February.

Regarding its half-year results, the company noted:

The half year results for the six month period to 31 December 2020 comprise of Energy, being a discontinued operation, and Mobile that is considered a discontinued operation held for sale during the period.

With that caveat in mind, net profit after tax (NPAT) from both the energy and mobile segments came in at $6.52 million in H1 FY21, up 65% compared to the previous corresponding period.

Amaysim reported a 7% decline in revenue from ordinary activities, while diluted earnings per share (EPS) were 2.06 cents, up from 1.27 cents in H1 FY20.

The company will not pay any dividends for the half year. Amaysim noted its main asset is now a material cash balance and it is currently subject to an unconditional off-market takeover offer from WAM Capital Limited (ASX: WAM).

If all goes to plan, Amaysim will pay its major distribution in April and expects to pay the final distribution around October

Amaysim expects to delist from the ASX on 31 March.

Amaysim share price snapshot

The last 12 months have been good for shareholders, with the Amaysim share price up by more than 140%. By comparison, the All Ordinaries Index (ASX: XAO) is flat over that same period.

Year to date, the Amaysim share price is up 1.97%.

More reading

• Why is the WAM Capital (ASX:WAM) share price on the rise?
• Top brokers name 3 ASX shares to sell next week
• Wilson Asset Management (WAM) thinks these 2 ASX shares are a buy
• Here’s why the AGL (ASX:AGL) share price is climbing higher today
• ASX 200 down 0.1%: Telstra update impresses, AMP sinks, Newcrest jumps

Motley Fool contributor Bernd Struben 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 Bank of Queensland Limited (ASX: BOQ) share price will be one to watch closely this week.

This morning the regional bank announced plans to raise funds to make a huge acquisition.

What did Bank of Queensland announce?

This morning Bank of Queensland announced that it has entered into an agreement to acquire 100% of Members Equity Bank (ME Bank) for a cash consideration of $1.325 billion. This acquisition will be funded by an underwritten capital raising of $1.35 billion.

According to the release, management believes the acquisition of ME Bank will be transformational and that the two businesses are strategically aligned.

It is expected to deliver material scale, broadly doubling the Retail bank and providing geographic diversification.

It also notes that it will combine two strong complementary trusted brands, with shared customer-centric cultures and differentiated customer segments.

Further, management sees a clear pathway to a scaled, common, cloud based digital Retail bank technology platform.

What about the financials?

Positively, Bank of Queensland believes the acquisition will be financially compelling.

It is expected to be low double-digit to mid-teens cash earnings per share accretive including full run-rate synergies in the first year (FY 2022). It is also expected to be cash return on equity accretive, by over 100 basis points including full run-rate first year synergies.

Synergies are expected to reach $70 million to $80 million pre-tax by year three.

The two businesses will have pro forma total assets over $88 billion, with total deposits of more than $56 billion.

Based on ME Bank’s latest results, the acquisition price represents an implied acquisition multiple of 1.05x reported book value and 11.9x cash earnings.

Bank of Queensland’s Chairman, Patrick Allaway, commented: “Today’s announcement is another major step in our strategy to be the leading customer-centric alternative to the big banks. With the addition of the ME Bank business, BOQ now has material scale and a compelling growth platform to support this ambition.”

“The combination of our highly complementary businesses brings together two organisations with a shared purpose and values generating greater value for customers, employees and shareholders. This is underpinned by the successful revitalisation of the bank since early 2020 with the team’s strong execution capabilities being reflected in our earnings progress to the half,” he added.

Capital raising

Bank of Queensland is raising the funds via a $1 billion underwritten 1 for 3.34 accelerated pro-rata non-renounceable entitlement offer and a $350 million underwritten institutional placement.

The offer price for both the placement and the entitlement offer will be $7.35 per share, representing a 12.6% discount to Bank of Queensland’s last close price of $8.41 on 18 February.

The Bank of Queensland share price will return from its trading halt once the placement is complete.

More reading

• Bank of Queensland (ASX:BOQ) shares halted ahead of potential $1.3bn ME Bank acquisition
• Bank of Queensland (ASX:BOQ) shares hit a 52-week high today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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