Tag: Motley Fool

The Zip Co Ltd (ASX: Z1P) share price has soared by 19.53% in morning trade today. At the time of writing, the Zip share price has rocketed to $9.06 after closing yesterday’s session at $7.58 This follows the company’s announcement of a new major partnership with eBay Australia.

New partnership driving Zip share price

The new partnership announced today gives businesses the opportunity to directly access working capital through the eBay Australian marketplace. It also aligns with the official launch today of Zip Business. There are currently 40,000 Australian small and medium-sized businesses (SMBs) that have access to this service.

By being part of the eBay marketplace, merchants will now have access to a flexible line of credit. This can be used to purchase inventory while also covering their short-term expense needs for activities such as marketing campaigns. The new tool also has the ability to help merchants manage their cash flow requirements. This is done through online access to a range of credit options.

Zip has also integrated the Spotcap brand into the Zip Business portfolio, as part of the official launch. The Spotcap business will be combined with Zip Co’s risk decisioning and real-time onboarding capability. This will fast track the scaling of the SMB buy now, pay later (BNPL) offering.

Zip is set to roll-out further products in the coming months as part of the Zip Business launch. These new offerings will support both its SMB network, and its retail and channel partnerships.

New debt funding facility

The Zip share price is surging after the company also announced it has finalised a $100 million debt funding facility arrangement with United States firm, Victory Park Capital Advisors. This debt arrangement will be utilised for the Zip Business receivables. It will provide Zip Co with additional capacity to support the launch of its new business announcement.

Peter Gray, Zip Co founder and Chief Operating Officer, commented:

Zip is extremely excited to formally launch its Zip Business platform to create a suite of products for the small business community, a segment that has been underserved by the traditional lenders in recent years. This comes at a time when Australia’s small businesses are confronting the extreme challenge of COVID-19, which has created enormous pressure on cashflow and ongoing business investment. A thriving small business community is critical to the health of the Australian economy and we are deeply committed to supporting the growth of these important businesses.

The announcement by Zip Co today, follows a trading update two days ago regarding New York-based BNPL provider QuadPay, which Zip has acquired. Zip revealed that QuadPay ended the month of July with record monthly transaction volumes, 30% up on the June quarter average. 

With today’s rise, the Zip share price has increased more than 155% in year-to-date trading. Zip is scheduled to release its FY 2020 results to the market tomorrow.

More reading

• Flexigroup share price in trade halt ahead of capital raise
• Why Bigtincan, Cleanaway, Worley, & Zip Co shares are storming higher
• This rising sentiment is spurring the share market’s bull run
• Is this ASX 200 market too greedy right now?
• 4 exciting ASX tech shares surging higher today

Phil Harpur 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 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 APA Group (ASX: APA) share price is sliding this morning after the company released its financial results for the year ended 30 June 2020 (FY20).

At the time of writing, the APA Group share price is down 2.90% to $10.54 per share.

FY20 highlights

In today’s announcement, APA Group revealed revenue of $2.59 billion for FY20 – a 5.6% increase on the 2019 financial year.

The company reported profit after tax of $317 million in the 2020 financial year, up 10.1% on 2019. According to APA Group chair Michael Fraser, earnings were safeguarded by the company’s strong balance sheet and its long-term contracts.

APA Group reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $1.65 billion in FY20, an increase of 5.1% on FY19.

The company had operating cash flow of $1.1 billion in FY20, an increase of 8.3% compared to FY19. As at 30 June 2020, APA Group had around $2.5 billion in cash and undrawn debt facilities.

The company stated that it will pay a final distribution of 27 cents, the dividend component of which will be fully franked.

Outlook

Looking to the next financial year, APA Group advised it is expecting an EBITDA of $1.63 billion to $1.67 billion in FY21. It also expects distributions to be in line with the 2020 financial year.

Commenting on the outlook for FY21, Mr Fraser stated: 

While our capacity contracts and regulated revenues mean that our business is somewhat resilient through economic cycles, APA’s revenues are still subject to recontracting decisions by customers, throughput volumes on certain assets, the timing of customer FID decisions, as well as lower CPI across the contracts portfolio.

He also stated that practical completion of the company’s Orbost gas processing plant would not take place until the end of the 2021 financial year.

About the APA Group share price

APA Group is a natural gas and electricity infrastructure business. It is the largest provider of natural gas infrastructure in Australia and has been listed on the ASX since 2000.

APA Group shares are up 30.76% since their 52-week low of $8.06, however, they have fallen 5% since the beginning of the year. The APA Group share price is down more than 4% since this time last year. 

More reading

• 3 ASX dividend shares that have increased their payouts in 2020
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
• 3 Warren Buffett ASX dividend shares you can buy right now
• Investors wanting safe income should own these 3 ASX shares
• 3 ASX dividend shares raising their dividends like clockwork

Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of APA Group. 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 Cleanaway Waste Management Ltd (ASX: CWY) share price has soared in early trade today after the company released its FY2020 earnings results. The Cleanaway share price is up more than 8% at the time of writing to $2.42 a share after closing at $2.24 yesterday.

What does Cleanaway do?

Cleanaway is the largest waste management company on the ASX, with a market capitalisation of $4.6 billion. The company is active in the residential, commercial and industrial waste industries, with an especially large presence in the collection of residential waste. Cleanaway has contracts with more than 95 municipal councils for waste collection. It also boasts the largest hydrocarbon (oil) recycling program in the country.

What did Cleanaway report this morning?

The company reported that revenue increased to $2.33 billion, up 2.1% from FY2019.

Earnings before interest, tax, depreciation and amortisation (EBITDA) also rose by 2.5% to $473 million over FY19’s earnings. That translates into an 8.7% increase to 7.5 cents in earnings per share (EPS).

That helped boost underlying net profit after tax by 8.7% to $152.9 million, although statutory net profit slipped 6.6% from FY19’s result to $112.6 million. This was largely due to underlying costs from the recent acquisitions of Toxfree and SKM.

The company also reported that its free cash flow was up 11.5% for FY20 to $230.1 million.

Dividend reward

Dividend investors will be pleased by Cleanaway’s results this morning. The company has announced a 10.5% increase in its final dividend to 2.1 cents per share. That pulls its total dividend payments up to a fully franked 4.1 cents per share for the financial year, up 15.5% on FY19’s payout of 2.55 cents per share. The final dividend will be paid on 14 September, with the option of participating in the company’s dividend reinvestment plan at no discount.

This dividend gives Cleanaway a trailing yield of 1.83% on yesterday’s closing share price.

Cleanaway’s segments were a mixed bag. Revenue from Solid Waste was up 0.8% to $1.37 billion, while revenue from Industrial & Waste was down 8.3% to $313.4 million. Liquid Waste & Health reported a 3.8% increase to $513.6 million.

Cleanaway share price outlook for FY21

Looking to FY21, the company told investors that “trading conditions remain too variable to provide guidance currently”. A trading update will be provided at the company’s annual general meeting on 14 October instead.

However, the company’s CEO Vik Bansal has this to say on the FY20 results:

Our financial results highlight the defensive characteristics of our revenue streams. Each of our operating segments – Solid Waste Services, Industrial & Waste Services and Liquid Waste & Health Services – performed well during the year despite the effect of COVID-19, which highlights the diversification benefit of our operating segments and strength of our business.

More reading

• Why Bigtincan, Cleanaway, Worley, & Zip Co shares are storming higher
• Pact Group share price up as dividend restored
• Are ASX tech shares the only way to protect your portfolio against the coronavirus?

Motley Fool contributor Sebastian Bowen 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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A millionaire executive director of Simonds Group Ltd (ASX: SIO) will be forced to go into hotel quarantine after authorities revoked his exemption.

Mark Simonds, the son of founder Gary, escaped Melbourne’s strict COVID-19 lockdown on 9 August with his family on their luxury super-yacht Lady Pamela.

They sailed towards the Gold Coast armed with an exemption from the Queensland government that they didn’t have to quarantine on arrival.

But according to Nine, the family and their guest had stopped off multiple times in Victoria and NSW as it sailed up north.

Queensland Health confirmed to The Motley Fool that the exemption had now been withdrawn.

“Attempting to bypass or manipulate Queensland’s border direction is unacceptable,” stated Queensland Health.

“All seven people are now required to quarantine in a government approved hotel for 14 days at their own expense.”

The Motley Fool has contacted Simonds Group for comment.

It is understood the exemption was originally granted with what is now known to be incomplete information.

Police reportedly took 7 people off the boat into a mini-van on Tuesday evening. The group included crew and Hannah Fox, the daughter of Linfox executive chair Peter Fox.

Simonds Group is an ASX-listed company with a market capitalisation of $51 million. The Simonds share price held steady at 36 cents before trading opened on Wednesday morning.

It operates Simonds Homes, a Melbourne residential construction brand founded in 1949 by Gary Simonds.

Mark ran the company privately with father Gary until its public listing in 2014. Mark Simonds holds a building licence in Victoria, NSW, Queensland and South Australia.

The company is now jointly run by Gary’s grandson Rhett Simonds in a unique timeshare chief executive role with Kelvin Ryan.

More reading

• Flexigroup share price in trade halt ahead of capital raise
• Why Bigtincan, Cleanaway, Worley, & Zip Co shares are storming higher
• Jumbo share price drops lower on flat FY 2020 profits
• Zip share price surges 20% on eBay partnership
• APA Group share price dips despite FY20 earnings growth

Motley Fool contributor Tony Yoo 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 Bigtincan Holdings Ltd (ASX: BTH) share price has been a positive performer on Wednesday following its full year results release.

At the time of writing the AI-powered sales enablement automation platform provider’s shares are up 5% to 92 cents.

How did Bigtincan perform in FY 2020?

Bigtincan was a strong performer in FY 2020 despite the pandemic and continued its meteoric growth.

For the 12 months ended 30 June 2020, Bigtincan reported revenue growth of 56% to $31 million. This includes organic growth of 38%, which was at the top end of guidance range. Also supporting its top line growth were the acquisitions of the Veelo, Asdeq Labs, and XINN businesses.

The company’s annualised recurring revenue (ARR) also grew at a rapid rate in FY 2020. It increased 53% year on year to $35.8 million.

Key drivers of this growth were a 57% lift in subscription revenue to $29.5 million and a 2-percentage point improvement in its retention rate to 89%.

At the end of the period the company’s lifetime value metric grew 70% from $112 million to $270 million.

Management commentary.

Bigtincan’s CEO, David Keane, commented: “FY20 was a successful year for Bigtincan as the Company continued to grow through the pandemic, with a focus on enterprise customers and on our technology, to take advantage of the tailwinds of digital and mobility adoption that are impacting the world.”

“During FY20, Bigtincan won the coveted CODiE Award for best sales enablement automation platform and continued its growth path with key metrics growing strongly, including ARR growth of 53% over last year, retention up to 89%, subscription revenue up 57%, and LTV up 70% demonstrating efficient growth with LTV/CAC at 3.9,” he added.

FY 2021 outlook.

Although the company acknowledges that the medium to long term impact of the pandemic is uncertain, it remains confident in its growth prospects.

Management notes that Bigtincan enters FY 2021 in a strong position with a leading technology platform and pipeline of innovations for the year ahead and beyond, an established and growing go to market team, and a well-funded M&A program.

In light of this, it is forecasting further strong growth in FY 2020.

It has provided ARR guidance of $49 million to $53 million and revenue guidance of $41 million to $44 million with stable retention.

In respect to its ARR guidance, this represents 36.9% to 48% year on year growth. Whereas its revenue guidance implies growth of 32.3% to 42% year on year.

More reading

• 3 exciting mid cap ASX tech shares to buy for the long term
• Bigtincan joins list of junior ASX tech companies adapting to COVID-19
• 4 exciting small cap ASX shares to watch closely
• Could these exciting ASX shares be future stars?
• 2 exciting ASX tech shares to buy and hold till 2025

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends BIGTINCAN FPO. The Motley Fool Australia owns shares of and has recommended BIGTINCAN 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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If you are looking for 2 quality ASX shares to add to your portfolio, I can recommend the following two.

I think JB Hi-Fi Limited (ASX: JBH) and Vocus Group Ltd (ASX: VOC) are good ASX shares to buy for long-term capital growth. Here’s why.

JB Hi-Fi

Electronics retailer JB Hi-Fi has been a solid and consistent performer from a financial perspective over the past decade. The company’s  full year financial results came in last week, and it has been a particularly strong year for the group.

Total sales grew solidly by 11.6% to $7.9 billion during FY 2020. Meanwhile, underlying EBIT growth was very impressive, up by 30.5% to $486.5 million.

Online sales have been very strong during the last 12 months. They totalled nearly $600 million for the group. That was up a whopping 50% on the prior year. The fourth quarter was a standout quarter for JB Hi-Fi, up with online revenues up 134%, driven by increased interest in online sales during the coronavirus pandemic.

The JB Hi-Fi share price was hit hard in the first wave of the the pandemic. However, since then it has soared and now is well above pre-COVID-19 levels.

I believe that JB Hi-Fi is well-positioned to grow strongly over the next five years, underpinned by an expanding online channel. This makes it a quality ASX share to add to your portfolio.

Vocus

Fixed broadband provider Vocus also released its full year financial results recently. And like JB Hi-Fi’s, they were very well received by financial markets. The Vocus share price has surged from $2.93 prior the results release, to now be trading  at $3.50. That’s an increase of 19.5% in just over a week.

Vocus’ three year turn-around strategy now appears to be well and truly on track. Record sales were recorded across all of the Vocus operating segments. Also, the newly launched Vocus brand has been well-received by the market so far.

Vocus Network Services achieved EBITDA growth of 10% to reach $223 million for FY 2020. Meanwhile, recurring revenue for this division grew solidly by 6%. However, overall recurring revenue for the group fell by 1%. Total revenues were impacted by a 9% decline in the consumer division. This was due to the impact of migration of legacy fixed-line services to lower margin NBN revenues.

Despite overall decline in overall revenue, I believe that there is potential for further growth in the Vocus share price over the next one to two years. This is likely to be be driven by further progress on the telco’s turnaround strategy.

Foolish Takeaway

JB HiFi and Vocus are 2 ASX shares that I believe are well-positioned for long-term growth over the next few years. This could lead to above average share price growth during this time.

More reading

• This rising sentiment is spurring the share market’s bull run
• Is this ASX 200 market too greedy right now?
• Here are the highlights of this ASX reporting season
• 3 ASX share reports I loved this week
• How will the University of Oxford’s COVID-19 vaccine impact ASX share prices?

Motley Fool contributor Phil Harpur 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 Whispir Ltd (ASX: WSP) share price is on the move today following the release of its full year results.

At the time of writing the communications workflow platform provider’s shares are down 6.5% to $4.47.

How did Whispir perform in FY 2020?

Whispir was on form in FY 2020 and delivered a result ahead of its prospectus forecasts.

For the 12 months ended 30 June 2020, the company delivered a 25.5% increase in revenue to $39.1 million and annualised recurring revenue (ARR) growth of 34% to $42.2 million. This compares to its prospectus forecast of $37.8 million and $42 million, respectively.

This strong growth was driven by increased usage and a greater than forecast increase in net new customers during the 12 months. Whispir finished the period with 630 total customers, up 120 and ahead of its target of 621.

Also coming in better than its prospectus forecast was its churn levels. Gross revenue churn reduced to only 2.4%, while customer churn was lower than forecast at 7%.

Total operating expenditure was $31.7 million for the year, leading to an EBITDA loss of $7.3 million. This was also better than its prospectus forecast for an EBITDA loss of $9.4 million.

At the end of the period the company’s balance sheet was strong, with a net cash balance of $15.2 million.

What were the drivers of its growth?

Whispir’s CEO, Jeromy Wells, was rightfully very pleased to see the company exceed all its key prospectus metrics.

He commented: “Whispir’s strong performance in its first full year as a listed company has ensured we have achieved or exceeded all key Prospectus metrics. Increased platform usage from our existing customer base was the key revenue growth driver in FY20, delivering total annual revenue of $39.1m, up 25.5% YOY and 3.3% ahead of our Prospectus Forecast.”

The majority of its revenue continues to be generated in the local ANZ market, but is being supported by other regions.

“The more mature Australia and New Zealand (ANZ) business continues to perform ahead of expectations, currently accounting for around 79% of total group revenue. Meanwhile, our operations in Asia are rapidly growing with revenue increasing 44% YOY to $6.8m.”

And although the chief executive acknowledges that the pandemic gave its performance a boost in FY 2020, he appears confident that this isn’t a short-term thing.

Mr Wells explained: “While COVID-19 provided a tailwind for the business, it really just accelerated the macro trend for the adoption of easy-to-use yet sophisticated communications software.”

“As businesses respond to rapidly changing operating requirements, they need to be able to communicate with all their stakeholders; employees, suppliers and customers, more effectively and Whispir has satisfied that demand,” he added.

The chief executive also notes that the second half surge in demand has not yet been fully reflected in its results.

“Significant new customer growth in the second half is yet to have a material impact on revenue and ARR. Most new customers start by quickly deploying Whispir for one or two use cases that meet an immediate need. However, our experience shows that new customers quickly appreciate the significant benefits our cutting-edge communications workflow platform delivers, which inevitably leads to increased transactional volumes as customers deploy additional use cases,” he explained.

Outlook.

While the company acknowledges that there is a high level of uncertainty in the current economic and business environment, it remains positive on its prospects in FY 2021 and has provided guidance for the year ahead.

In FY 2021 Whispir expects to deliver ARR of $51.1 million to $55.3 million and revenue of $47.5 million to $51 million. The high end of these guidance ranges represent year on year growth of 31% and 30.4%, respectively.

The company is also forecasting the narrowing of its loss to an EBITDA loss of between $6.2 million to $4.8 million. The latter will be an improvement of 42% or $2.5 million.

More reading

• Here’s why I think the Whispir share price is a buy
• 4 exciting small cap ASX shares to watch closely
• Could these exciting ASX shares be future stars?
• These soaring tech shares are making savvy investors rich
• Are these small cap ASX shares future stars?

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 Whispir Ltd. The Motley Fool Australia has recommended Whispir 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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Every time there is a market-wide event, there are opportunities. We saw it during the coronavirus lockdown crash, during the recovery, and now we are seeing it during earnings season. Exploiting inefficiencies in the market is applicable across all types of companies. However, if your goal is to retire rich, then I believe you will need to consider investing a percentage of your portfolio in growth shares. 

While this is higher risk, it doesn’t have to be an absolute gamble. However, here are a few quick rules to remember. Growth companies often sell at high price-to-earnings (P/E) multiples. Also, very importantly, do not invest so much you cannot sleep at night. Risk is real, not just a figure, and not everything goes to plan.

Artificial intelligence is the future

The Brainchip Holdings Ltd (ASX: BRN) share price has risen by 91.17% over the past two weeks. It is the world’s largest listed pure play artificial intelligence (AI) company. The company is very close to finishing its first-of-a-kind neuromorphic chip.

This is a company already has an array of products, patents, and groundbreaking technological developments. For example, Brainchip has good market share in the casino industry where it is used in security applications. Another prominent vertical is facial recognition of terror suspects and wanted criminals in airports and subways. With a market capitalisation of $486.50 million, I think Brainchip is a good share to own if you want to retire rich.

Retire rich from fintechs

One of the companies I have been watching for a fair while is Ecofibre Ltd (ASX: EOF). I think the management of this company comprises some pretty astute individuals. It produces non-psychoactive hemp products for distribution in the United States and Australia. The company’s primary product is cannabidiol (CBD), used in nutraceutical products. The company reported a 42% increase in top line revenues, and an eye watering 119% increase in net profit after tax (NPAT). 

It has three main verticals. Food, nutraceuticals of where it has 51% of the USA pharmacy sales market, and clothing. The clothing vertical shows how astute and agile these managers are. After spending 2 years developing this technology at Thomas Jefferson University and filing patents, the management wisely pivoted from its planned yoga wear products to face masks and neck gaiters. Consequently, they were able to break even in three months.

I feel that management as agile and financially astute as this can easily help you to retire rich. Ecofibre has a market capitalisation of $926.98 million.

A necessary service

CML Group Ltd (ASX: CGR) is one of those companies I think is undervalued by the market. It has a market capitalisation of just $73.97 million. This company provides various forms of short term debtor finance for small businesses. These are short term credit services where assets other than security are used. For example, with invoice finance, the invoice is the security, 80-90% would then be provided in immediate funds, and the credit provider is paid back the principal plus the margin when the invoice is paid.

The company also acquired a software as a service (SaaS) company, Skippr. This platform allows CML to provide greater support to small business, one of its key verticals. It allows their clients to automatically qualify, apply for invoice credit. As well as monitoring payments and invoice tracking. This gives the company the potential to service smaller receivables accounts as the overheads are now far lower. 

Foolish Takeaway

These companies have three common traits. In my view these are essential parts of the search for growth shares that can help you retire rich.

First, they are all run by professional managers. Every one of them is a revenue generating company. The financial records show continual growth in sales, cash flow and revenue. 

Second, they all have very large addressable markets and have built significant barriers to entry. In the case of these three companies, they are protected either by one of a combination of being the first mover, technological patents, and company secrets. 

Third, all of them have a market capitalisation under $1 billion. The actual figure doesn’t matter. But when I am reviewing these companies I ask myself; can I see it doubling its share price? For example, Afterpay Ltd (ASX: APT) is now worth the same as Coles Group Ltd (ASX: COL), and more than Woodside Petroleum Limited (ASX: WPL). Personally, I cannot see it doubling again. But I think any of the companies above could do so over a 2 – 3 year timeframe.

More reading

• Brainchip share price up 1000% in 5 months. Is it the next big thing?
• Ecofibre share price on watch after doubling profits
• Brainchip share price rockets 30% in a week
• ASX shares to buy with $10,000 in August
• Brainchip share price surges 9% on new financing facility

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. 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 Worley Ltd (ASX: WOR) share price could be well supported this morning after it posted a big lift in profits and dividend.

But it isn’t only the earnings numbers that will necessarily please shareholders.

It’s more the fact that the wheels haven’t fallen off its controversial ECR acquisition it made last year.

Large profit surge

The profit jump and the acquisition are linked of course. On that note, management reported an 80% surge in underlying earnings before interest and tax before amortisation of acquired assets (EBITA) to $743 million.

It’s underlying net profit before amortisation of acquisitions jumped by two thirds to $432 million, while aggregate revenue increased 75% to $11.3 billion.

Dividend increase despite $4.6bn acquisition

What’s just as pleasing is the increase in underlying operating cash flow to $881 million from $239 million. There’s also the bigger 25 cents a share final dividend (up from 15 cents) despite the $4.6 billion ECR takeover.

The large acquisition contributed significantly to Worley’s top and bottom lines, as it should. But sceptics who doubt that the acquisition is working will be reassured by the boost in synergies.

Bedding down ECR going better than expected

“The integration of ECR was substantially completed during the year and we have delivered acquisition cost synergies of $177 million at 30 June 2020,” said Worley’s chief executive Chris Ashton.

“We have increased the target to $190 million, to be delivered by April 2021.”

The synergies are on top of another $275 million it hopes to save from current operations.

Re-rating opportunity for underperformer

The reassurance could spark a re-rating in the stock given that the Worley share price is a woeful underperformer. Shares in the engineering contractor plunged 40% since the start of calendar 2020 when the S&P/ASX 200 Index (Index:^AXJO) fell 8%.

In contrast, the Seven Group Holdings Ltd (ASX: SVW) share price lost 3% although the Downer EDI Limited (ASX: DOW) share price is faring worse with a close to 50% loss in value.    

Is Worley hunting for its next takeover?

As with most companies, Worley only provided a vague outlook amid the COVID-19 volatility. Management blamed the fast-changing environment for making FY21 more difficult to forecast than previous years.

However, it said the group is more resilient with the ECR business as it’s better diversified across countries and industries.

Management even hinted that it might be on the hunt for further acquisitions that are inline with its transformation strategy.

It might need to given its high exposure to fossil fuels. It generated more than $5 billion from servicing oil and gas companies.

More reading

• Seven Group share price on watch following FY 2020 earnings release
• 5 things to watch on the ASX 200 on Wednesday
• ANZ-Roy Morgan consumer confidence rises as COVID-19 case numbers fall
• ASX 200 rises, Bingo jumps after reporting
• Afterpay share price leaps 7% today after 3 broker upgrades

Motley Fool contributor Brendon Lau owns shares of Seven Group Holdings Limited and WorleyParsons Limited. Connect with him on Twitter @brenlau.

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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Afterpay Ltd (ASX: APT) is fast becoming the success story of 2020. The Afterpay share price has risen a staggering 1,000% since its March lows and is rocketing higher again this week.

Why the hype around the Afterpay share price?

The hype surrounding the Afterpay share price isn’t new. The company is arguably the most well known buy now, pay later (BNPL) brand in Australia, even though it’s only been operating for around three years. During that time, more and more retailers have been displaying the Afterpay logo on their doors and windows, so it’s a brand that is hard to ignore.

Earlier this year, Chinese fintech giant Tencent Holdings, acquired approximately 5% ownership, driving the Aftrepay share price higher. Tencent is a well known player in the tech world, so having it onboard as a major shareholder certainly made Afterpay investors happy.

Recently, Afterpay announced its intentions to expand into Europe through the $82 million acquisition of Pagantis, a Spanish fintech company in the BNPL space. Although based in Spain, Pagantis currently operates in Spain, France and Italy, providing multi-region access for Afterpay.

Justifying the acquisition, is Afterpay’s intention to use this brand to access the massive $500 billion eCommerce market in the European Union.

The Pagantis brand will ultimately be rebranded as Clearpay, with the existing technology being merged into the core tech provided by Afterpay. As a rough guide, Afterpay has earmarked the expansion plans to commence early next year.

As the BNPL giant already has operations in Australia, New Zealand, the United States and the United Kingdom, Europe is a logical next step.

Afterpay share price performance

The Afterpay share price is currently trading at $92.48, at the time of writing. This is almost crazy, considering the BNPL giant’s stock was selling for less than $10 in March this year!

The last six months of trading represents a return to investors in excess of 1,000% – a staggering run.

When Tencent Holdings announced its 5% stake in the company, the Afterpay share price jumped more than 20% in a single day. This latest announcement around a European Union venture has had a similar effect, sending the stock in excess of 10% higher in Tuesday’s trade.

Afterpay has returned an astronomical 3,300% to investors since its initial public offering (IPO), and doesn’t look to be slowing down any time soon.

Upcoming results

Afterpay issued an announcement to the ASX on 18 August stating it would be releasing its FY20 results on Thursday 27 August at 10am, Melbourne time. While the expansion plans are very exciting for the BNPL player, investor concerns will no doubt be circling the fact that Afterpay is still unprofitable, losing more than $40 million per year. With revenue increasing, however, a break even could be achieved in a few short years.

Main competition

Afterpay is by no means the only player in this space, but it is one of the biggest and has a massive market share. Some of Afterpay’s biggest competitors include Sezzle Inc (ASX: SZL), Splitit Ltd (ASX: SPT) and Zip Co Ltd (ASX: Z1P).

Foolish takeaway

The Afterpay share price has sustained a massive run for a company that isn’t making any profit. I believe this is largely due to investors piling into the stock and wanting to share in the success. However, just because there’s no profit yet, this doesn’t mean it won’t be there in the near future. Companies in this space need time to generate a profit and, at the end of the day, Afterpay is only three years old, so it’s still very early days. The results release on Thursday this week should be very interesting given all the company’s recent developments.

More reading

• Afterpay share price leaps 7% today after 3 broker upgrades
• Leading brokers name 3 ASX shares to sell today
• This rising sentiment is spurring the share market’s bull run
• Why Afterpay, BINGO, Scentre, & Westpac shares are charging higher
• Why the Xero share price can crack $100 per share in 2020

glennleese 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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