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In afternoon trade the S&P/ASX 200 Index (ASX: XJO) looks set to end its winning streak with a disappointing decline. At the time of writing, the benchmark index is down 0.65% to 6,873.2 points.

Four ASX shares that are falling more than most today are listed below. Here’s why they are sinking:

Coles Group Ltd (ASX: COL)

The Coles share price is down almost 6% to $17.15. This follows the release of its half year results this morning. Although Coles delivered a profit result ahead of expectations, investors appear concerned by management’s comments on its outlook. The supermarket giant’s CEO, Steven Cain, warned: “Depending on COVID-19, vaccine roll out and efficacy, and other factors, sales in the supermarket sector may moderate significantly or even decline in the second half of FY21 and into FY22.”

Netwealth Group Ltd (ASX: NWL)

The Netwealth share price is down 4.5% to $17.13. This is despite the investment platform provider delivering strong growth during the first half. For the six months ended 31 December, the company recorded a 30.1% increase in EBITDA to $40.5 million. This was driven by strong growth in Netwealth’s funds under administration over the last 12 months.

Pro Medicus Limited (ASX: PME)

The Pro Medicus share price is down 2.5% to $44.46. This is quite a turnaround for the health imaging company’s shares. At one stage, the Pro Medicus share price had fallen 17% following the release of its half year results. Investors may have been disappointed that its revenue and profits fell a touch short of expectations during the half.

Zip Co Ltd (ASX: Z1P)

The Zip share price has crashed 14% lower to $11.97. This appears to have been driven by profit taking after some incredible gains in recent weeks. As I mentioned here earlier, the Zip share price was up an incredible 143% in the space of just one month. Given these strong gains and the general weakness in the tech sector today, Zip’s decline isn’t overly surprising.

More reading

• Netwealth (ASX:NWL) share price dips despite record results
• ASX 200 down 0.5%: Domino’s delivers, Westpac impresses, Coles sinks
• Why the Evolution (ASX:EVN) share price crashed despite record results
• Why the Pro Medicus (ASX:PME) share price is getting thumped today
• Coles (ASX:COL) share price on watch following half year update

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 and recommends Pro Medicus Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Netwealth. The Motley Fool Australia has recommended Pro Medicus Ltd. 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 Vicinity Centres (ASX: VCX) share price has remained resilient after releasing its results for the first half of FY21. At the time of writing, the Vicinity share price has retreated slightly to $1.60, down 0.2%. 

How has Vicinity Centres performed?

Shares in the Aussie retail investment trust (REIT) have remained fairly stable this morning after releasing a disappointing half-year report.

For the first half of FY21, Vicinity Centres reported a loss of $394.1 million. The REIT cited that reduced funds from operations and substantial property revaluation costs contributed to the loss.

Consequently, Vicinity reported funds from operations had declined to $267.1 million, from $337 million in the prior corresponding period. The company attributed this to rental waivers and provisions for unpaid rent during the COVID-19 pandemic.

Additionally, Vicinity Centres also reported a net property valuation loss of $572.4 million for the first half.

Despite the disappointing financial results, Vicinity declared a dividend distribution of 3.4 cents per share for the first half, down from 7.7 cents in the prior corresponding period. The distribution equates to $154.8 million for the first half, reflecting a payout ratio of 62.4%.

Vicinity noted that the conservative dividend distribution was due to the uncertainty around full-year earnings and the COVID-19 pandemic.

The outlook for Vicinity Centres remains uncertain

In the half-year report, Vicinity’s management highlighted the tough trading conditions imposed by the pandemic.

Vicinity Chief Executive and Managing Director, Grant Kelley, noted that:

While the retail industry is showing continuing signs of recovery, we recognise that uncertainty remains, with the potential for further COVID-19 restrictions, the unwinding of temporary government support measures, and a prolonged recovery in CBDs on the eastern seaboard.

Despite the challenging conditions, Vicinity’s management remains optimistic about the company’s outlook. According to Mr. Kelley:

Vicinity is well-positioned to benefit from improving economic conditions, with consumer and business confidence now approximating pre-pandemic levels, fuelled by fiscal stimulus measures and record low interest rates.

However, Vicinity noted that in the interim there remains uncertainty given the fluid nature of the pandemic. As a result, Vicinity did not provide full-year earnings guidance. 

Notably, the company is targeting a distribution payout ratio of 95 % to 100% of Adjusted Funds From Operations (AFFO) for the full year.

What does this mean for the Vicinity Share Price?

Vicinity Centres is one of the largest REITs in the country. Its major assets including Chadstone (Melbourne) and Chatswood Chase (Sydney).

The impact of the COVID 19 pandemic was reflected in the Vicinity share price, which has plummeted more than 35% in the past year.  

At the time of writing, investors remain undecided on the company’s half-year report. Consequently, Vicinity share price trading relatively flat for the day.

More reading

• SCA (ASX:SCP) share price rises on double-digit increase in dividend and profit
• ASX property stocks are likely to beat property investments in 2021

Motley Fool contributor Nikhil Gangaram 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 Westpac Banking Corp (ASX: WBC) share price has risen by 5% after the bank reported a strong recovery of its underlying profit in the first quarter of its 2021 financial year.

Banks continue to face a difficult operating environment with the COVID-19 pandemic still affecting certain areas of the economy. However, Westpac has shown that parts of the economy are now doing much better than in the second half of FY20.

Westpac’s FY21 first quarter profit

Westpac reported that its unaudited statutory net profit was $1.7 billion, up significantly from the FY20 second half quarterly average of $550 million.

It also revealed that it made cash earnings of $1.97 billion for the quarter, up strongly from the FY20 second half quarterly average of $808 million. Excluding notable items, cash earnings grew by 54%.

Those notable items included provisions for the AUSTRAC proceedings, refunds, payments, costs and litigation, write-down of intangibles and asset sales and revaluations. The AUSTRAC provision caused a hit to the Westpac share price when the market first learned of it. 

A key reason for the increase in profit was an impairment benefit of $501 million from improved credit quality, the stronger economic outcomes and a better economic outlook.

The big four ASX bank also said that core earnings were up 28%, or 3% excluding notable items.

Westpac’s net interest margin (NIM) was 2.06%, this was an increase of 3 basis points from the second half of FY20 (up 2 basis points excluding notable items).

Westpac’s loan book and credit quality

The big bank said that credit quality has improved and there were no new large individually assessed provisions. The percentage of stressed assets to total committed loan exposure fell 15 basis points, with almost all industry segments improving. Consumer delinquencies of more than 90 days were lower over the quarter, including Australian mortgages that were overdue by more than 90 days falling by 16 basis points to 146 basis points. 

Looking at the deferrals, the total continues to decline. At 31 January 2021, $11 billion of Australian mortgages were still being deferred. The Westpac share price has steadily climbed more than 40% over the last six months. A significant roll-off of deferrals is expected over February and March.

There was also $400 million of business loans still in deferral at 31 January 2021, which represents less than 1% of the small business portfolio.

Balance sheet strength

Westpac reported that its balance sheet was strong, with its common equity tier 1 (CET1) ratio increasing by 74 basis points quarter on quarter to 11.9%.

CEO commentary

The CEO of Westpac, Peter King, said: “It has been a good start to the year with higher earnings, a stronger economy, and solid progress on our fix, simplify and perform strategic priorities.

“While uncertainty remains around the impact of local COVID outbreaks, there is cause for optimism. The economy is recovering, consumer and business confidence is strong, and the labour market has been much more resilient than expected. At the end of December there were 12.9 million employed Australians compared to 13 million in March 2020.”

Initial reaction

The market has had its say by sending the Westpac share price up by more than 5% so far today. 

Some analysts have also had their say in the result. As quoted in the Sydney Morning Herald, Morningstar analyst Nathan Zaia said: 

The market had been concerned Westpac’s loan book was worse than rivals, but the update and an improvement in arrears rates had allayed those fears. Markets had also worried Westpac had a weaker capital position than rivals, but the update showed it was now sitting on significant surplus capital…I definitely think much bigger dividends are on the horizon.

More reading

• ASX 200 down 0.5%: Domino’s delivers, Westpac impresses, Coles sinks
• Why Domino’s, EML Payments, Redbubble, & Westpac shares are storming higher
• Westpac (ASX:WBC) share price on watch as it delivers $2bn quarterly profit result
• Here’s why the CBA (ASX:CBA) share price is underperforming today
• ASX 200 Weekly Wrap: ASX cools on earnings reality check

Motley Fool contributor Tristan Harrison 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 Asaleo Care Ltd (ASX: AHY) share price is gaining today, up 4.9% at $1.43 at the time of writing. This follows the release of Asaleo’s full-year financial results for FY20.

What did Asaleo Care report?

The personal hygiene products producer and distributor reported a 2.3% increase in revenues from 2019, to $419.2 million. Asaleo Care said its retail segments and B2B incontinence healthcare collectively increased by 6.7%.

The company reported underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $87.2 million, having earlier given an EBITDA guidance in the range of $84-87 million. Underlying EBITDA from its continuing business was $89.2 million, up 6.3%.

Statutory net profit after tax (NPAT) increased by 46.2% to $32.3 million. And the company reported it continues to reduce its net debt, down to $94.9 million from $139.2 million in the 2019 financial year.

Asaleo Care will pay a dividend of 3 cents per share (cps), fully franked, with a payment date of 31 March. Investors who want in on the dividend need to own shares by 16 March.

The company revealed it had not received any COVID-19 related government assistance.

Words from the management

Commenting on the results, Asaleo Care CEO Sid Takla said:

Despite the persistent challenges of 2020, we delivered full year earnings ahead of guidance, revenue growth across both Retail and B2B segments, and delivered market share gains across key retail categories. Our focus remains on executing against our strategic plan, sustaining investment in our brands, driving innovation, and creating efficiencies across our business.

We have entered FY21 with a strong balance sheet and the lowest level of debt since listing, which affords us the capacity to fund ongoing dividends and the flexibility to explore future acquisition opportunities. Asaleo Care is now firmly on a path towards sustainable earnings growth, with longer-term favourable tailwinds supporting our categories…

Takla pointed to an increasing focus on quality aged care, better hygiene awareness, and growing demand for locally produced products to support the company’s growth ambitions.

Looking ahead, Asaleo Care is targeting 5-7% revenue growth and EBITDA of $90-93 million for the 2021 financial year.

Asaleo Care share price snapshot

Asaleo Care’s share price hit a 52-week high on Monday after the company confirmed it was in discussions with Essity Aktiebolag to acquire the outstanding ordinary shares in Asaleo.

The company’s shares are up 31% over the past 12 months, compared to a 1% loss on the All Ordinaries Index (ASX: XAO). Year-to-date, the Asaleo Care share price is 5.15% higher.

More reading

• The Rhipe (ASX:RHP) share price slides despite strong sales growth
• Why the Asaleo Care (ASX:AHY) share price jumped to a 52-week high today
• ASX 200 Weekly Wrap: ASX cools on earnings reality check
• Why is the Ecograf (ASX:EGR) share price on a wild ride today?
• Mesoblast (ASX:MSB) share price surges on new results

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.

The post Why the Asaleo Care (ASX:AHY) share price is up 5% today appeared first on The Motley Fool Australia.

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Netwealth Group Ltd (ASX: NWL) shares are on the slide today following the release of the company’s results for the first half of the 2021 financial year (1H FY21). At the time of writing, the Netwealth share price has slumped 4.25% to $17.14.

Let’s take a look at how the wealth management business has been performing.

Netwealth share price slides despite numerous highlights

The Netwealth share price has failed to ignite today despite the company reporting a record half-year increase to its funds under administration (FUA). 

Netwealth increased its FUA for the half by $7.3 billion, or around 23%, taking its total FUA as at 31 December 2020 to $38.8 billion.

For the 12 months to 31 December 2020, FUA grew to $10.3 billion, a 36.1% increase.

Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $40.5 million — an increase of 30.1% compared to the prior corresponding period (pcp). 

Netwealth’s earnings per share (EPS) was 11.3 cents.

The company reported total income of $72.4 million, which represents a 23.4% increase on the prior half.

Net profit after tax (NPAT) rang in at $27.6 million, which was 34.5% or $7.1 million higher than the pcp.

The board declared a fully franked interim dividend of 9.06 cents per share totalling $22.1 million for the period. The dividend is payable on 26 March 2021.

Company outlook

Netwealth advised that its pipeline of new business and transitions remains strong.

Based on no adverse changes to the operating environment and subject to the timing of transitions, the company expects its FY21 FUA net inflows to be in the range of $8.5 billion to $9 billion.

Netwealth also expects to benefit from growth in its affluent, high net-worth and private wealth groups.

The company added 25 additional technology infrastructure resources across Australia and Vietnam during 1H FY21. The purpose of these is to build synergies with third-party software solutions providers and to continue enhancing operational efficiency and scalability.

Foolish takeaway

The Netwealth share price has gained more than 100% over the past 12 months. Netwealth shares have surged more than 200% since their March 2020 lows but are still trading around 8% lower than their 52-week high of $18.71.

Based on the current Netwealth share price, the company commands a market capitalisation of around $4.4 billion.

More reading

• ASX 200 Weekly Wrap: Change in America spurs ASX 200 higher
• These were the best performing ASX 200 shares last week
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises 0.8%
• ASX 200 up 0.65%: Zip update impresses, Netwealth rockets, Cleanaway dumped

Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Netwealth. 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 Wednesday the S&P/ASX 200 Index (ASX: XJO) is on course to record a disappointing decline. The benchmark index is currently down 0.5% to 6,880.7 points.

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

Westpac Q1 update impresses

The Westpac Banking Corp (ASX: WBC) share price is racing higher today. Investors have been buying the banking giant’s shares after its first quarter update impressed. Westpac reported a quarterly cash profit of $1.97 billion for the three months ended 31 December. This was more than double the quarterly average it achieved during the second half of FY 2020. Another big positive was that Westpac has reversed some of its COVID impairments. The bank recorded an impairment benefit of $501 million in the period after the COVID-19 threat receded.

Coles disappoints

The Coles Group Ltd (ASX: COL) share price has come under pressure today following the release of its half year results. While Coles delivered a profit result ahead of expectations, its outlook appears to have spooked investors. CEO Steven Cain warned: “Depending on COVID-19, vaccine roll out and efficacy, and other factors, sales in the supermarket sector may moderate significantly or even decline in the second half of FY21 and into FY22.”

Domino’s delivers

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price hit a record high this morning after investors responded very positively to its first half results. The pizza chain operator delivered a 16.5% increase in total global food sales to $1.84 billion and a 32.3% EBIT jump to $153 million. This was driven by strong same store sales growth and new store openings. Pleasingly, management is confident on the second half. CEO and Managing Director, Don Meij, said the company intends “to significantly outperform this strong result in the Second Half.”

Best and worst ASX 200 performers

The EML Payments Ltd (ASX: EML) share price is the best performer on the ASX 200 today with a 13% gain. This follows the release of its half year results, which revealed strong revenue and profit growth. The worst performer has been the Zip Co Ltd (ASX: Z1P) share price with a 12% decline. This appears to have been driven by profit taking after some incredible gains in recent weeks.

More reading

• Why Domino’s, EML Payments, Redbubble, & Westpac shares are storming higher
• Why the EML Payments (ASX:EML) share price is rocketing 19% higher
• Why the Evolution (ASX:EVN) share price crashed despite record results
• Domino’s (ASX:DMP) share price higher after delivering strong first half growth
• Westpac (ASX:WBC) share price on watch as it delivers $2bn quarterly profit result

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited and EML Payments. 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 Aussie Broadband Ltd (ASX: ABB) share price is flying today as the company announced strong half-year results for FY21. Shares in the telecom company are currently trading 8.66% higher, at a price of $2.76.

Established in 2008, Aussie Broadband is an Australian owned and operated telecommunications company based in Victoria. It currently has a market capitalisation of $523 million.

What’s driving the Aussie Broadband share price?

For the half-year ending 31 December 2020, the small-cap Aussie telecom provider saw its revenue increase 89% to $157.4 million. Handily outpacing its prospectus forecasts of an 84.1% increase.

Thanks to the strong increase in revenue, earnings before interest, tax, depreciation and amortisation (EBITDA) also grew strongly to $7.3 million. This is an increase of 87% on the prior corresponding period and again, ahead of forecasts.

What’s more, this number comes in at $8.4 million when IPO expenses are deducted. EBITDA was driven by customer growth, lower marketing expenses, NBN extending customers COVID-19 credits and promotional rebates.

Marketing expenses for the period were $9.7 million, 16% lower than forecast. This was largely a result of the pandemic affecting supply chains. Nonetheless, despite the lower marketing expenses, Aussie Broadband said it exceeded its customer connection targets for the period.

Moreover, the company increased its broadband connections by 31% from June 2020. It had provided 342,634 connections on the NBN and OptiComm networks at the end of the period. As such, Aussie Broadband’s market share increased to 4.2%, compared to 2.85% last term.

Management comments

Commenting on the results, Aussie Broadband managing director Philip Britt said:

In a year with significant disruption to the community and many people and businesses doing it very tough, our team has managed to significantly grow our market share, maintain network performance and further improve our already great customer experience …all during the peak of a pandemic and whilst listing the company on the ASX.

We have continued to build out critical infrastructure for our network that will shape the quality of our service for years to come, and invested heavily in our Australian team and technology capability, including internal software enhancements and network automation.

What now

With the high degree of uncertainty continuing to exist around the marketplace, Aussie broadband noted there was potential for guidance to change.

Nevertheless, Aussie Broadband estimates that revenue for FY21 will be between $345 to $355 million. Well above the $338 million estimated in the company’s prospectus report. Residential broadband is also expected to continue its strong run with the company estimating to have between 380,000-410,000 connections at the end of the financial year.

More reading

• ASX 200 drops 0.3%
• Why the Aussie Broadband (ASX:ABB) share price rocketed 20% higher today
• Why Aussie Broadband, Fisher & Paykel Healthcare, Lynas, & Megaport are charging higher

Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Aussie Broadband 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 Super Retail Group Ltd (ASX: SUL) share price opened around 2% higher this morning following the release of the company’s half-year results. 

At the time of writing, the Super Retail Group share price is approximately $11.30 a share, down 2.6%.

Let’s check out the half-year performance and what it might mean for the Super Retail Group share price.

Super Retail share price slumps despite strong half-year results

Super Group Retail reported total group sales of $1.78 billion for 1HFY21. This is a 23% increase from the prior corresponding period (pcp). Online sales soared 87% to $237.4 million.

The company’s group segment earnings before interest, tax, depreciation and amortisation (EBITDA) powered up 95% to $311.4 million. Statutory net profit after tax (NPAT) charged 201% higher to $172.8 million. Underlying NPAT also blasted up 139% reaching $177.1 million.

The Group had no bank debt and a cash position of $416.8 million at the end of the period. The Super Retail Group fully franked interim dividend is 33 cents per share.

Commenting on the performance, Chief Executive Officer and Group Managing Director, Anthony Heraghty said: 

We are pleased with a first half financial performance characterised by robust top-line growth, higher gross margin and strong operating leverage. Our omni-retail capability has been instrumental in enabling the Group to pivot towards shifting consumer spending habits and deliver profitable growth, underpinned by strong digital sales.

The strong operating leverage that the Group has been able to deliver in the first half, during a period of robust online sales growth, clearly reinforces the profitability of our digital sales and the scalability of our omni-retail platform.

Company snapshot

Super Retail Group owns and operates a portfolio of retail brands across Australia. The brands include automotive retailer Supercheap Auto, outdoor and leisure retailers Macpac BCF, and sporting retailer Rebel Sport.

The Group fulfilled over 2 million online orders during the first half and increased the membership of its online loyalty club by adding 700,000 more members than in the pcp.

Over the past 12 months, the Super Retail Group share price has gained roughly 29%.

More reading

• 2 highly rated ASX dividend shares with big yields
• ASX retail shares show strong signs of resurgence 
• 2 ASX dividend shares rated strong buys by brokers
• Leading brokers name 3 ASX shares to buy today
• 2 ASX dividend shares with yields above 4.5%

Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group 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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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to end its winning streak. The benchmark index is currently down 0.6% to 6,875 points.

Four ASX shares that are not letting that hold them back are listed below. Here’s why they are storming higher:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

The Domino’s share price is up 4% to $101.39. This follows the release of the pizza chain operator’s first half results this morning. For the six months ended 31 December, Domino’s delivered a 16.5% increase in total global food sales to $1.84 billion. Thanks to margin expansion, the company’s EBIT grew at the even quicker rate of 32.3% to $153 million. Domino’s CEO and Managing Director, Don Meij, said the company intends “to significantly outperform this strong result in the Second Half.”

EML Payments Ltd (ASX: EML)

The EML Payments share price has jumped 13% to $4.77. Investors have been buying the payments company’s shares following the release of its half year results. EML Payments reported a 54% increase in group gross debit volume to $10.2 billion and a 61% jump in revenue to $95.3 million. And while changes in its sales mix weighed on margins, net profit after tax before amortisation still came in 30% higher at $13.2 million. Management reinstated its guidance and is predicting strong full year growth.

Redbubble Ltd (ASX: RBL)

The Redbubble share price is up 4% to $5.91. Investors have been buying the ecommerce company’s shares following a selloff on Tuesday. Analysts at Goldman Sachs believe the weakness in the Redbubble share price is a buying opportunity and have put a buy rating and $7.15 price target on its shares.

Westpac Banking Corp (ASX: WBC)

The Westpac share price has stormed 5% higher to $23.65 following the release of its first quarter update. Investors have been buying the banking giant’s shares after it delivered a $1.97 billion quarterly cash profit. This was more than double the quarterly average of $808 million it achieved during the second half of FY 2020. Westpac recorded an impairment benefit of $501 million in the period as the COVID-19 impact receded.

More reading

• Why the EML Payments (ASX:EML) share price is rocketing 19% higher
• Domino’s (ASX:DMP) share price higher after delivering strong first half growth
• Leading broker says Redbubble (ASX:RBL) share price selloff is a buying opportunity
• Westpac (ASX:WBC) share price on watch as it delivers $2bn quarterly profit result
• 3 things you might have missed from the Redbubble (ASX:RBL) result

James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited and EML Payments. 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 EML Payments Ltd (ASX: EML) share price has been a very strong performer on Wednesday.

In morning trade the payments company’s shares were up as much as 19% to $5.00.

The EML Payments share price has since pulled back but remains 12% higher at $4.72 at the time of writing.

Why is the EML Payments share price rocketing higher?

Investors have been fighting to get hold of EML Payments shares this morning following the release of its half year results.

For the six months ended 31 December, the company reported strong growth across all key metrics.

EML Payments reported a 54% increase in group gross debit volume to $10.2 billion, which led to a 61% jump in revenue to $95.3 million.

Due to the company’s pivot to deriving the majority of its revenue from the General Purpose Reloadable (GPR) segment, its margins narrowed slightly.

This ultimately led to group earnings before interest, tax, depreciation and amortisation (EBITDA) growing at a slightly slower (but strong) rate of 42% to $28.1 million. And on the bottom line, the company reported group net profit after tax (before amortisation) growth of 30% to $13.2 million.

EML Payments achieved underlying operating cash inflows of $35.1 million, up 68% on the prior corresponding period. This left it with a cash balance of $136.5 million. No dividend was declared.

What were the drivers of its growth?

The key driver of EML Payments’ growth during the first half was the aforementioned GPR segment.

Gross debit volume from the GPR segment grew 233% over the prior corresponding period to $4.87 billion. This was driven largely by the inclusion of Prepaid Financial Services, which contributed $3.12 billion in gross debit volume. EML Payments completed the acquisition of the UK-based business in April 2020.

As expected, the company’s Gift & Incentive (G&I) segment struggled during the first half due to COVID-19 related mall closures, lockdowns, and social distancing regulations. Its gross debit volume fell 11% to $0.75 billion.

Finally, the Virtual Account Numbers (VAN) segment performed well and delivered a 6% increase in gross debit volume to $4.59 billion. Management advised that this was driven by volume growth from existing customers. The business finished the period on a run rate of $815 million per month. Management feels this is a positive sign for the remainder of the year.

Outlook

Speaking of the remainder of the year, this morning the company has reinstated its guidance for FY 2021.

Full year revenue is forecast to come in between $180 million and $190.0 million. This will be up 48% to 56% on FY 2020.

EBITDA is forecast between $50 million and $54 million, up 54% to 66% on FY 2020.

Finally, net profit after tax before amortisation is forecast to be in the range of $30 million to $33.5 million. This will be up 25% to 40% on FY 2020.

Management notes that its guidance incorporates the uncertainty of COVID-19 as lockdown and social distancing measures remain in place for the foreseeable future in many of its key markets in Europe and North America.

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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 and recommends EML Payments. The Motley Fool Australia has recommended EML Payments. 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 EML Payments (ASX:EML) share price is rocketing 19% higher appeared first on The Motley Fool Australia.

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