Tag: Motley Fool

The CSL Limited (ASX: CSL) share price is climbing higher today following the release of its annual general meeting presentation.

At the time of writing, the biotherapeutics company’s shares up 1.5% to $302.96.

What was in CSL’s annual general meeting update?

As well as the usual rundown on its performance over the last 12 months and board changes, CSL provided the market with a trading update and its expectations for FY 2021.

According to the release, trading conditions have been relatively mixed for CSL this financial year because of the pandemic.

Management expects its Seqirus vaccines business to continue to benefit from its differentiated products and strong demand for influenza vaccines. The latter is being driven in part by Governments wanting to protect their populations from contracting COVID and influenza.

The company’s Albumin sales are expected to normalise following the successful transition to its new business model in China.

Management is also expecting strong demand for its plasma and recombinant therapies to continue. However, due to COVID restrictions, which are expected to restrain its ability to collect plasma, the costs of collection are expected to increase.

The good news is that the company has a number of initiatives underway to mitigate the impact.

What about research and development?

CSL also provided an update on its research and development (R&D).

While its R&D response to COVID, as well as new initiatives, will put upward pressure on its R&D expense, it is still expected to be within its guidance range of 10-11% of revenue.

Speaking of guidance, CSL has updated its profit guidance for FY 2021.

It now expects revenue growth in the range of 6 to 10% in FY 2021, with net profit after tax of approximately $2.170 to $2.265 billion in constant currency. The latter implies growth of 3% to 8%.

This is a slight tightening of the range advised with its FY 2020 results of 0% to 8%.

More reading

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• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares

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 CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The James Hardie Industries plc (ASX: JHX) share price is climbing today after an upgraded guidance for FY21.

The news has sent the James Hardie share price to $36.52, up 3.69%. This compares to the S&P/ASX 200 Index (ASX: XJO) which is down 0.1% to 6,191 points.

Let’s take a look at what James Hardie does and what it reported today.

What does James Hardie do?

James Hardie is a manufacturer of fibre cement siding and backerboard. The fibre cement product is used in a number of markets, including residential construction, manufactured housing, repair and remodelling as well as commercial applications.

The company operates in the United States, Australia, New Zealand, the Philippines, Europe and Canada.

Upgraded guidance

James Hardie raised its net operating profit after tax (NOPAT) guidance for FY21. The adjusted guidance range to be between US$380 million and US$420 million.

For the second quarter, the company anticipates group net sales to jump around 12% between US$735 million and US$740 million. Group adjusted earnings before interest and tax (EBIT) is also expected to increase by approximately 22%, representing an amount between US$160 million and US$165 million.

James Hardie noted that the second quarter result would see its key financial metrics at all-time quarterly highs.

The record performance is expected to be made possible by growth in all geographical markets. The company noted this would be the first time North America, Asia Pacific and Europe had all provided strong returns.

James Hardie CEO, Dr Jack Truong welcomed the result, saying:

This is the sixth consecutive quarter that we have delivered growth above market with strong returns. We continue to achieve these results by executing better every day against our strategic imperatives and seamlessly serving our customers, while improving working capital for our customers and for the company.

LEAN manufacturing

In addition to the upgraded guidance, James Hardie advised it had made significant progress on its internal efficiencies. The company’s LEAN manufacturing transformation and Zero-harm focus has created demand for its premium-quality products. The fibre cement and fibre gypsum building materials are said to be the preferred brand for homeowners.

Dr Truong said the transformation began more than 18 months ago.

Delivering these consistent results is a testament to the foundational strength we are building within our company. Our commitment to Zero Harm and our focus on global manufacturing efficiency has allowed us to consistently provide a high level of service to our customers and deliver quality products to the markets in which we operate around the world.

This transformation, which is driven by a continuous improvement mindset, has enabled our ability to deliver consistently improving financial results.

James Hardie share price summary

The James Hardie share price has been on an upward trend since the market meltdown in March. The world’s number 1 producer of fibre cement saw its share price fall to a low of $12.54 in March and jump almost 200% to today’s price.

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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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Sonic Healthcare Limited (ASX: SHL) share price has been a positive performer on Wednesday.

In morning trade the healthcare company’s shares are up 2% to $35.40.

Why is the Sonic share price pushing higher?

Investors have been buying the company’s shares after the release of its first quarter update.

According to the release, Sonic has started the year very strongly and delivered first quarter revenue growth of 29% to $2,144 million.

Things have been even better for its earnings thanks to a material increase in its margins. For the three months ended 30 September, Sonic’s earnings before interest, tax, depreciation and amortisation (EBITDA) was up 71% on the prior corresponding period to $580 million.

What is driving Sonic’s strong growth?

The key driver of Sonic’s strong performance in the first quarter has been COVID-19 testing.

Management notes that the company is continuing to perform a crucial frontline role in combating the COVID-19 pandemic. Its laboratories in Australia, the United States, and Europe are currently testing thousands of people every day for COVID-19. To date, Sonic has conducted more than 9 million COVID-19 tests globally.

Pleasingly, the rest of its business is performing well and supporting its growth.

Management advised that the majority of its divisions grew base business revenues during the quarter. Combined with the cost saving initiatives that were implemented during the early days of the pandemic, their earnings have been growing nicely.

Contract updates.

Sonic advised that the Australian Government has recently extended Sonic’s contract to provide the dedicated pathology service for rapid sample collection and testing for COVID-19 in residential aged care facilities to March 2021.

Over 2,700 residential aged care facilities across the country are eligible for this service, which is provided through Sonic’s national network of laboratories and collection teams.

In addition, Sonic has been selected and funded by the US and UK governments to create additional COVID-19 PCR surge testing capacity in preparation for the Northern Hemisphere winter.

“Unprecedented times.”

Sonic’s CEO, Dr Colin Goldschmidt, commented: “In these unprecedented times, Sonic’s global leadership teams continue to adapt and respond superbly to a fluid COVID-19 environment encompassing increased testing volumes, maintenance of rapid turnaround of results, evaluation of new testing platforms, global supply chain issues, different collection modalities and necessary IT enhancements.”

“Our leaders continue to draw on Sonic’s strong Medical Leadership culture, and to leverage the group’s collective management and medical experience and team spirit at national and international levels. In addition, Sonic’s decades-long investments in cutting edge infrastructure and equipment have created the flexibility required to embrace the rapid growth and new environment presented by the COVID-19 pandemic,” he added.

Outlook.

No guidance was given for the remainder of the year due to the ongoing level of uncertainty resulting from the pandemic.

Management also warned that the growth levels in the first quarter may not continue throughout FY 2021.

More reading

• 5 things to watch on the ASX 200 on Tuesday
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Afterpay Ltd (ASX: APT) share price has defied gravity and set a new record all-time high of $98.68 this morning. With its share price chart looking almost vertical in recent months, what’s next for the Afterpay share price? 

A tech share bull market? 

The broader tech market has been running strong with the Nasdaq Composite (NASDAQ: .IXIC) eyeing previous record all-time highs set in September. Back at home, the S&P/ASX 200 Index (ASX: XJO) finally broke out of its COVID-19 induced trading range between 5725 and 6200 in intraday trading yesterday. The strength in the ASX 200 has seen the S&P/ASX All Technology Index (ASX: XTX) deliver a 1-month return of 20% and 5-day return of 10%. Clearly the recent strength in the broader market and tech shares has supported the Afterpay share price run. However, give Afterpay an inch and it’ll take a mile. 

Broad BNPL run 

The Afterpay share price has run almost 23% in October, at the time of writing. However, it isn’t an outlier as there has been a broad appreciation in buy now, pay later (BNPL) share prices in October. 

• Zip Co Ltd (ASX: Z1P) share price up around 22% 
• Openpay Group Ltd (ASX: OPY) share price up around 9% 
• Sezzle Inc (ASX: SZL) share price up around 18% 
• Splitit Payments Ltd (ASX: SPT) share price up around 12% 
• Laybuy Group Holdings Ltd (ASX: LBY) share price up around 16% 

I believe Afterpay and Zip are clear leaders in the BNPL sector. As such, I am avoiding other players which I believe have exhibited inferior share price performance, despite appearing ‘cheaper’ or ‘playing catch up’. Nonetheless, the BNPL sector appears to have put the fears regarding Paypal Holdings Inc (NASDAQ: PYPL) and increased competition from players such as the big 4 banks behind it. 

What’s next for the Afterpay share price? 

Personally, I believe the Afterpay share price has largely had its run and without additional announcements or a push from the broader market, is likely to pullback from current prices. Afterpay typically holds its AGM in mid-November at which it will likely update the market with its transaction volumes, geographic expansions and/or partnerships. Investors should look out for details such as: 

• Transaction/revenue growth and any potential impacts due to competition/Paypal 
• Update for its North America expansion into Canada in August 2020 
• Acquisition of Pagantis to launch in Spain, France and Italy with regulatory approval to also operate in Portugal 
• First step in Asia with its small acquisition of a Singaporean-based company operating in Indonesia (EmpatKali) 
• Potential opportunities leveraging its Tencent Holding Ltd (HKG: 0700) network and relationships to expand into new regions in Asia 

Foolish takeaway

I believe buying the Afterpay share price at today’s prices would be the equivalent of chasing your losses. If I was still eager to buy Afterpay shares, I would instead be watching closely on the side lines for a better risk/reward entry price. 

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• Why the Afterpay (ASX:APT) share price has hit a new record high

Lina Lim 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 PayPal Holdings. 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 and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings and Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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China controls more than 80 per cent of the world’s rare earth supply and heightened tensions with the US could see exports restrictions come into play. Global supply risks combined with the demand-side application of rare earths for industries such as defence, renewables and technology could make rare earth miners the next ASX shares to boom. 

ASX shares in the rare earths sector

Lynas Corporation Ltd (ASX: LYC)

Lynas is the largest rare earths producer outside of China with its flagship Mt Weld rare earths deposit in Western Australia and separation plant in Malaysia. The company’s FY20 results outlined the heightened spotlight for rare earths and global appetite for a reliable, diversified rare earths supply chain. Lynas has positioned itself as a proven and reliable supplier to key markets, and continues to engage with end users and governments. 

The company is expanding its production and selected Kalgoorlie WA as the location for a new rare earths processing facility. This project was awarded Lead Agency status by the Government of Western Australia and Major Project status by the Australian Government.

Furthermore, Lynas was selected by the US Department of Defence for a Phase 1 contract for a US heavy rare earths separation facility. Phase 1 will involve a detailed market study, planning and design work for a facility in the US. In terms of the breadth and depth of ASX shares within the rare earths space, I believe Lynas is the ‘blue-chip’ opportunity given its size, track record and revenues. . 

RareX Ltd (ASX: REE) 

RareX is focused on developing rare earth deposits in Australia including its Cummins Range rare earths project in the East Kimberly region of Western Australia.

The RareX share price has soared more than 150% in the last month following a series of exciting announcements. On 30 September, its first batch of assays received returned exceptional thick, high-grade results. Furthermore, on 7 October, it announced the start of drilling at a highly prospective location, 84km north of Lynas Corporation’s Mt Weld. RareX represents a highly prospective exploration project and potential nearology play given its drilling proximity to Lynas. However it carries significant risks as do most exploration players. 

American Rare Earths Ltd (ASX: ARR) 

American Rare Earths entered into the lucrative US rare earth market in 2019  following the acquisition of the La Paz rare earth project in Arizona. This acquisition secures ARR as the only listed ASX company with direct exposure to the US rare earths market. 

The company has received significant attention in recent weeks following the US President’s executive order intended to stimulate domestic production and processing of identified critical materials including rare earths. ARR is in the early stages of its exploration project and presents similar risks to that of RareX. 

Foolish takeaway

China’s monopoly on rare earths increases the importance of establishing a reliable supply chain outside China. I believe Lynas has taken the global spotlight as an established producer and could be a strong medium to long term investment.

More reading

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• ASX 200 rises 1%, Reliance Worldwide (ASX:RWC) climbs 11%
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Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In morning trade the Zip Co Ltd (ASX: Z1P) share price is edging lower despite the release of a strong first quarter update.

At the time of writing the buy now pay later provider’s shares are down 1% to $7.82. 

How did Zip perform in the first quarter?

Zip has started the new financial year very strongly and delivered record quarterly growth during the first quarter.

For the three months ended 30 September, the buy now pay later provider reported record quarterly transaction volume of $943.1 million, up 96% on the prior corresponding period.

This led to the company reporting an 88% increase in quarterly revenue to a record of $71.7 million.

Key drivers of this growth were its strong increases in transaction and customer numbers.

Over the three months, Zip experienced a 130% year on year increase in transaction numbers and a 114% lift in customers to 4.5 million. In respect to the latter, a total of 628,000 of these customers were added during the quarter.

Pleasingly, the company’s US-based QuadPay business is performing strongly. Management revealed that it experienced record results across all core metrics.

QuadPay reported $322.5 million in transaction volume, $23.4 million in revenue, and ended the quarter with 2.2 million customers. This means almost half of Zip’s customer base is now in the United States.

Also growing strongly during the quarter were Zip’s merchant numbers. Total merchants on Zip’s platforms increased to 34,400, up 69% year on year.

Another big positive was the company’s bad debt metrics in Australia. Management advised that its Australian monthly arrears, which is a forward indicator of future losses, reduced from 1.33% in June to 0.91% in September. It (rightfully) believes this is an outstanding result in the current climate.

“Extremely exciting” product and merchant pipeline.

Management was very pleased with the quarter and appears confident that this strong form can continue.

Managing Director and CEO, Larry Diamond, commented: “We are incredibly proud of the global team with another set of record results across all key geographies – Australia, New Zealand, the United States.”

“In particular, the US demonstrated significant growth with revenue and volumes up 50% and 42% QoQ, respectively, with a number of marquee merchants going live in the quarter.”

“Locally, the product and merchant pipeline are extremely exciting, and we look forward to a number of announcements in the months ahead. The current quarter has begun solidly in all markets, which is seasonally the strongest as we run up to Prime Day, Black Friday, Cyber Monday, Christmas and Boxing Day,” he added.

Mr Diamond also commented on industry trends, noting that credit card usage is fading fast.

He commented: “Customers are continuing to increase their online spend in response to COVID-19 supported by Zip’s products that provide a better and fairer, digital alternative to the credit card. Data from the recent quarter continues to show the demise of the credit card model – in Australia, by way of example, credit card balances collapsed 24% YoY, while balances accruing interest fell 28%.”

This certainly bodes well for the Zip and rivals such as Afterpay Ltd (ASX: APT) and Sezzle Inc (ASX: SZL).

More reading

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• ASX 200 Weekly Wrap: Budget, US election sparks 5% surge in ASX shares

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 owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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You might not think it, but the COVID-19 pandemic isn’t good news for the Propel Funeral Partners Ltd (ASX: PFP) share price.

While restrictions on gatherings at funerals have weighed in the near-term, the industry is facing a longer-term impact too.

But at least the Propel share price is showing some life this morning after management released a pleasing September quarterly update.

PFP share price coming alive

Shares in Australia’s second largest funeral services group jumped 2.5% to $2.84 – taking its year-to-date loss to 16%. This is around 9% below the S&P/ASX 200 Index (Index:^AXJO).

But Propel is in good company. The InvoCare Limited (ASX: IVC) share price lost 22% over the same period.

Earnings jump Propels stock

At least the first quarter of this financial year is kinder to Propel. Management reported a circa 18% rise in operating earnings before interest, tax, depreciation and amortisation (EBITDA) to $10.5 million.

What’s more, the average revenue per funeral rebounded to $5,835 from $5,421 in the previous quarter and is 2.9% above the FY20 average.

Management also boasted about strong cash flow conversion (where the EBITDA figure is close to operating cash flow). But investors will have to wait for the 4C to be released to see what the ratio is as the number wasn’t provided.

How COVID is impacting the sector

It seems the worst of the social restrictions may be behind the industry too. Most states in Australia and most areas in New Zealand now allow 100 mourners to attend funerals. Victoria is the laggard, but even in COVID central, you can have up to 10 people attend.

These restrictions have limited the opportunities for funeral companies to upsell services. Meanwhile, the relative low number of deaths in both countries have also dragged on funeral stocks even as the virus claimed over one million lives worldwide – and counting.

Jumping from one challenge to another

But the industry isn’t out of the woods. COVID is forcing us to adopt new habits, such as social distancing and better hygiene.

What this means is that very few of us are catching the flu. The rates of influenza are a key earnings driver for the sector given how many people die from its complications.

“Death volumes were materially below historical long term trends in key markets within which Propel operates,” said Propel.

“For example, in Tasmania registered deaths declined 12.6% on the [previous corresponding period]; and flu cases in Australia were circa 99% below the prior 5 year average.”

Source: Propel Funerals

The funeral industry could be facing its own structural challenge if we continue with our good habits!

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia has recommended InvoCare Limited and Propel Funeral Partners Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Resolute Mining Limited (ASX: RSG) share price has come under pressure on Wednesday and is dropping lower.

At the time of writing, the gold miner’s shares are down 1% to 97.5 cents.

This appears to have been driven by a sizeable pullback in the gold price overnight, which has offset a positive announcement.

What did Resolute announce?

This morning Resolute Mining released an updated mineral resource estimate for the Tabakoroni underground deposit at its Syama operation in Mali.

According to the release, ongoing exploration success at Tabakoroni has enabled the completion of a Pre-Feasibility Study (PFS) to assess the potential for a new underground gold mine to augment gold production from the Syama Gold Mine.

This has led to the Tabakoroni mineral resource being upgraded to 7.4 million tonnes at 4.4 grams per tonne gold, with a 1.5 grams per tonne gold cut off for a total of 1.04 million ounces.

This is an increase of 22% over the previous estimate in April of last year.

Gold production is expected to average approximately 80,000 ounces per annum over an initial four-year mine life. The All-In Sustaining Cost (AISC) is calculated to be US$974 an ounce.

Strong future production potential.

The company’s Managing Director and CEO, John Welborn, believes this study provides support for the its ambition of establishing underground operations at Tabakoroni. Operations of which he expects to enable total production from Syama to be sustained at approximately 250koz per annum going forward.

He commented: “Tabakoroni has been a highly successful Syama satellite open pit oxide mining operation for Resolute, producing approximately 400,000 ounces of gold over the past three years. We expect our ongoing exploration success and feasibility studies will confirm a future underground operation at Tabakoroni.”

What now?

Resolute still has a lot of work ahead and will continue its exploration and evaluation of the Tabakoroni underground mine potential into 2021.

Until then, further details on its plans for the Syama operation will be published in an updated Syama Life-of-Mine plan. This is expected to be completed during the current quarter.

More reading

• Are Resolute Mining (ASX: RSG) shares as good as gold?
• ASX 200 jumps 2.4% higher, numerous shares rise
• ASX 200 drops 0.3%, gold miners keep rising

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Spirit Telecom Ltd (ASX: ST1) is a telecommunications company which provides internet, cloud solutions, telephony services and phone names in Australia. The company has a market capitalisation of just $200 million but is making headway in revenues and scale. With the Spirit Telecom share price up more than 85% this year, could it become the next Telstra Corporation Ltd (ASX: TLS) share price?

About Spirit Telecom 

Spirit is a disruptor in the IT&T industry. It developed its own advanced, fixed wireless network which means it can provide Australian small to medium-sized businesses (SMBs) with ‘Sky-Speed’ internet, along with managed IT services and cloud-based business solutions. It is rated as Australia’s fastest internet service provider with symmetrical internet speeds ranging from 25 Mbps to a whopping 1Gbps. 

Q1 FY21 update 

On Tuesday, Spirit provided an upbeat business update for Q1 FY21. The business highlighted record growth and scale with total revenue at $15.6 million, up 149% year on year and 30% on Q4 20. The company has a balance sheet of $30.1 million of cash and available debt as of 30 September. Its flexible balance sheet position has allowed the company to build its acquisition pipeline with multiple targets currently under consideration and due diligence. 

The company has a number of growth initiatives coming in Q2 and Q3 including: 

• 70+ new resellers signed nationally 
• New Spirit branded mobile products and bundles to be launched nationally across Q2 to Q3
• Federal government budget tax incentives for businesses refreshing IT&T needs 
• NBN enterprise ethernet promotions 
• Acquisition opportunities 

The company currently has a revenue run rate of circa $80 million and is targeting circa +$85 million revenue run rate by the end of CY2020. 

The next Telstra share price? 

Spirit and Telstra are very different companies despite operating in the same sector. Telstra is a mature company but has struggled to deliver shareholder value in recent times. I believe there is little value in the Telstra share price from defensive, growth and yield perspectives. I feel there are far better ASX shares out that can more reliably deliver these benefits. 

The size and loss making nature of Spirit does make it a more risky investment than the likes of ASX 200 companies. However, the company is trading at a cheap revenue multiple with a strong balance sheet and business tailwinds to propel its earnings. I believe the company could be suitable for investors focusing on growth and capital gains, and the Spirit share price represents good value at today’s prices.  

More reading

• Why it’s always a good time to buy blue chip ASX shares
• Is the Telstra (ASX:TLS) share price a buy for 2021?
• Why I would buy Telstra (ASX:TLS) and this ASX dividend share right now
• Why the Telstra (ASX:TLS) share price soared 4% today
• ASX 200 jumps more than 1%, big ASX banks rise

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended SPIRIT TC FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Bank of Queensland Limited (ASX: BOQ) share price is on the move on Wednesday following the release of its full year results.

At the time of writing, the regional bank’s shares are up 0.5% to $6.44.

How did Bank of Queensland perform in FY 2020?

For the 12 months ended 31 August 2020, the regional bank reported cash earnings of $225 million. This was down 30% on FY 2019 and driven largely by a $133 million COVID-19 collective provision.

This was better than what the market was expecting. Goldman Sachs was forecasting cash earnings of $210 million and the market consensus stood at $204 million.

On a statutory basis, Bank of Queensland’s net profit after tax decreased by 61% to $115 million. This was due to previously announced restructuring charges and its intangible asset review.

What were the drivers of its result?

Had it not been for the one-offs, Bank of Queensland would have handed in a reasonably solid result.

The bank’s net interest income increased 3% to $986 million in FY 2020. This was driven by lending growth and an improving net interest margin. Bank of Queensland’s net interest margin increased by 3 basis points in the second half.

Things weren’t quite as positive for its non-interest income. It decreased by 14% over the year. Management advised that this reflects industry trends towards low and fee free banking products, as well as a ~$10 million impact from COVID-19 related fee reductions.

Capital position.

At the end of the financial year the bank was in a strong financial position. Its CET1 stood at 9.78%, which is well above APRA’s unquestionably strong benchmark.

This strong position has allowed the bank to declare a full year 12 cents per share fully franked dividend.

This comprises 6 cents per share from its first half profits and 6 cents per share from its second half profits.

Outlook.

The company’s Managing Director and CEO, George Frazis, commented: “We remain focused on executing on our strategy and maintaining momentum in our business. We have a clear transformation roadmap and are delivering against it.”

“Although difficult to predict in this environment, we expect to broadly deliver neutral jaws in FY21 driven by above system growth in lending, margin management to within 2-4bps decline, and cost growth of c.2%. Our prudent collective provision sees us well placed to withstand anticipated lifetime losses arising from COVID-19,” he added.

Mr Frazis concluded: “Our capital position is strong and organic capital generation will provide us with the ability to invest in and grow our business. We are committed to delivering long term shareholder value through sustainable, profitable growth and attractive returns. We understand the importance of dividends for our shareholders.”

More reading

• 5 things to watch on the ASX 200 on Wednesday
• What to expect from the Bank of Queensland (ASX:BOQ) full year result this week
• These are the 10 most shorted shares on the ASX
• 5 things to watch on the ASX 200 next week
• Here are the 10 most shorted ASX shares

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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