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The Genesis Energy Ltd (ASX: GNE) share price is on the move today, after the New Zealand energy company reported strong FY2020 results. The Genesis share price is currently up by 3.09% to $2.67 at the time of writing.

How did Genesis perform in FY 2020?

Genesis delivered earnings of $356 million despite challenging market conditions due to the pandemic. This represented a 4% decrease on earnings in FY 19. Throughout the year, Genesis flexed its portfolio of fuels and generation assets to ensure a solid result during a year of exceptionally dry North Island conditions. 

Genesis Energy today announced that it delivered net profit after tax of $46 million, with underlying earnings of $53 million. This represented a 22% and 17% decline, respectively.

Retail was the best performing segment as Genesis continued its momentum from the first half, backed by increased uptake of digital products and promotions. Examples of this include its Power Shout product, which saw a record 141,000 customers participate in May. Genesis now has 121,000 dual fuel customers, an increase of 3%. In contrast, the wholesale segment underperformed. It was impacted by the dry conditions lowering renewable generation and replacing it with thermal generation at higher fuel costs.

As such, hydro generation fell by 491 GWh versus the year prior. This means that Huntly Power Station’s back-up generation was called upon more regularly to stabilise wholesale electricity prices for Genesis’s customers, incurring higher costs for the company.

The company was happy as its “business strategy has been thoroughly stress tested this year and has performed under the challenging conditions.”

Final dividend and a dividend reinvestment plan

The Genesis board has declared a final dividend of 8.675 cents per share. This means that the total FY20 dividend comes in at 17.20 cents per share, a 1% increase over FY19. The company is continuing to offer its dividend reinvestment program, which offers shareholders a 2.5% discount.

FY21 guidance and Genesis share price

Genesis continues to target the strategic goal of $400+ million EBITDAF in FY21. As such, the company’s guidance is $395 million to $415 million. This is, of course, subject to hydrological conditions and any other unforeseen circumstances. In terms of capital expenditure, the company noted that it may spend up to $95 million, well above its long run target of between $50 to $70 million.

The Genesis share price is up by more than 3% today, but remains 14.92% down on this time last year.

More reading

• Perpetual share price gets a boost from full year results
• Medibank share price slumps after profits plunge 30%
• Tesla Gigafactory 1 to boost battery production capacity 10% after new $100 million panasonic investment
• Coca Cola share price on the rise, despite mixed earnings report
• Spirit Telecom share price soars 7% on capital raising and acquisition news

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Coca Cola Amatil Ltd (ASX: CCL) share price is moving higher today, despite the bottling company reporting drops in revenue, earnings and profits and a dividend cut in its half-year (1H20) result this morning. The Coca Cola share price started the day at $8.75 at market open and is up 4.57% at the time of writing to $9.15.

What did Coca Cola Amatil report this morning?

Coca Cola reported a 9.2% drop in revenue to $2.186 billion, down from $2.406 billion in 1H19.

Earnings before interest, taxation, depreciation and amortisation (EBITDA) came in at $370.5 million, down 19.4% from 1H19’s $459.7 million.

Meanwhile, ongoing net profit after tax (NPAT) also slumped, down 35.3% to $112.1 million from 1H19’s $173.3 million.

Amatil reported a statutory loss of $8.7 million (down from a profit of $168 million) after accounting for a write down in the value of its Fijian, Indonesian and Samoan assets.

Pleasingly for shareholders, an unfranked interim dividend of 9 cents per share was announced. It’s a long way from the company’s final dividend of 26 cents per share that was paid in February, but something is better than nothing. Amatil’s Managing Director Alison Watkins had this to say on the dividend: “We recognise the importance of dividends to our shareholders. We will continue to monitor market dynamics and intend to resume a higher dividend payout ratio as soon as possible”

Coca Cola Amatil hit by a perfect storm

The company has been hard hit by both the destructive bushfire season last summer, as well as the coronavirus pandemic and associated lockdowns earlier this year (and ongoing in Victoria). Both of these events have squeezed Coca Cola Amatil’s high margin distribution channels such as restaurants and events. This has resulted in an increase in lower margin ‘grocery’ sales. This is reflected in the company’s Australian market earnings (EBIT) margin, which fell from 12.9% in 1H19 to 9.2% in 1H20.

Overall, volumes of non-alcoholic ready to drink beverages fell 8% from 146.4 million cases in 1H19 to 134.7 million in 1H20. One bright spot was the company’s spirits division, which increased volumes by 10.8%.

Here’s some of what Amatil’s Managing Director, Alison Watkins, had to say on the numbers:

We experienced unique, market-wide challenges this half, ranging from Australian bushfires and Indonesian floods through to the COVID-19 pandemic which impacted all our businesses…

Our revenue broadly declined in line with volume, however, the impact on our group margin percentages was much greater (particularly in Australia), reflecting the compound impact of reduced volumes and marked shifts in channel and pack mix as consumers adapted to the COVID-19 restrictions.

Today’s results will be of little relief for Amatil shareholders. The Coca Cola share price has essentially gone nowhere since 2014, and remains around 40% off of the company’s all-time high share price of $15.24 that it hit back in March 2013 (7½ long years ago). The Coca Cola share price has also lagged the gains of the broader S&P/ASX 200 Index (ASX: XJO), which has recovered more than 34% since 23 March. Coca Cola shares are only up 13% over the same period.

More reading

• Why the Coca-Cola share price and these ASX stocks just got upgraded by brokers to “buy”
• Why Coca-Cola Amatil, REA Group, Redbubble, & Sezzle shares are storming higher
• Earnings preview: What to expect from the Coca-Cola Amatil half year result
• Top brokers name 3 ASX shares to buy next week
• ASX 200 rises 0.3%, investors bet on Tabcorp

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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The Spirit Telecom Ltd (ASX: ST1) share price has surged 7.3% today following the announcement of a capital raise and acquisition. The news comes on the back of the company’s release of record FY20 results earlier this week. 

Capital raise and acquisition

Spirit Telecom is seeking $23.2 million in a capital raise to provide immediate geographic expansion. The tele-communications company wants to do this through the simultaneous strategic acquisition of three IT managed service providers across Sydney Metro and Central NSW.

The three businesses bring strong intellectual property, products and engineering skills and generate $12 million in combined revenue. More than 60% of revenue is recurring and earnings before interest, taxation, depreciation and amortisation (EBITDA) is $2.5 million. 

Furthermore, the IT companies acquired will be re-branded as Spirit Solutions Partners. 

Spirit Telecom is seeking to disrupt the major telecommunications companies in addition to the major expansion plans. Funds raised will be allocated to further acquisition opportunities, to accelerate the development of the cloud product range in the Spirit X Digital sales platform, and to market the Spirit brand and products nationally. 

Record results for FY20

Spirit Telecom announced record FY20 results with revenue up 100% to $34.9 million resulting in a ‘transformative’ year for the company. Recurring revenue growth was up 48% to $23.5 million and solutions and projects revenue up to $11.4 million.

Underlying EBITDA surged 88% to $3.73 million which was at the upper end of the guidance range.  

The company has a healthy balance with $14 million of cash and available debt at end of FY20 with a $6 million drawdown. 

Spirit Telecom managing director  Sol Lukatsky was pleased with the result, saying FY20 had been a year of “phenomenal growth and transformation”.

Mr Lukatsky said:

The July trading update shows we’re off with a fast start to FY21 and we continue to pursue an aggressive growth agenda both organically and via a range of acquisition options.

In FY21 our priority is to bring our entire cloud and IT offering onto our digital sales platform, Spirit X, and expand our wholesaler dealer network – creating an even stronger engine for organic growth. We’ll continue with our disciplined M&A strategy, to find right-price, right-fit businesses that support the expansion strategy, as well as continuing to focus on integration and optimising growth synergies.

What’s ahead for the Spirit Telecom share price?

It has been a fast start in FY21, which bodes well for the Spirit Telecom share price.

July new sales of $2.3 million were up 165% month on month from June FY20 to July FY21. Sales were bolstered by the recent acquisition of Gold Coast-based Voice Print Data Group (VPD). Organic demand for Spirit products is also driving the growth.

More reading

• Coca Cola share price on the rise, despite mixed earnings report
• Why CSL, Iress, Santos, & Webjet shares are dropping lower
• After the stellar COVID-19 rebound, can ASX share prices keep rising?
• Pacific Smiles share price jumps 10% on FY20 results
• Iress share price dives 6% on half-year results

Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. 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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In early afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on course to end its winning streak. The benchmark index is down 0.9% to 6,112.2 points.

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

The CSL Limited (ASX: CSL) share price is down 3% to $302.12. This decline may have been driven by a broker note out of Citi this morning. According to the note, the broker has downgraded CSL’s shares to a neutral rating with reduced price target of $320.00. The broker made the move following the release of the biotherapeutics company’s full year results on Wednesday.

The Iress Ltd (ASX: IRE) share price is down 5% to $10.67. This follows the release of the financial technology company’s half year results this morning. Although IRESS reported a 12% increase in revenue, it posted a disappointing 14% decline in net profit for the half.

The Santos Ltd (ASX: STO) share price has fallen 4% to $5.63. Investors have been hitting the sell button after the energy producer’s half year results disappointed. Santos posted a 16% decline in sales revenue to US$1.7 billion for the half. Things were much worse on the bottom line, where the company recorded a loss of US$289 million. And while Santos will pay an interim dividend, it is down 65% on the prior corresponding period to 2.1 U.S. cents.

The Webjet Limited (ASX: WEB) share price is sinking notably lower today after the release of its full year results. In FY 2020 the online travel agent posted a 27% decline in revenue to $266.1 million and a massive statutory net loss after tax of $143.6 million. This statutory result includes one-off items totalling $117.7 million. These include $40 million debtor write-offs, $14.6 million associated with the closure of Webjet Exclusives, and a $20 million impairment of intangibles from the closure of Online Republic Cruise.

More reading

• After the stellar COVID-19 rebound, can ASX share prices keep rising?
• Iress share price dives 6% on half-year results
• ASX 200 down 1%: Qantas results, Afterpay hits record high, Webjet crashes lower
• Sonic share price surges to record high as its profit results defy sceptics
• Santos share price slumps as interim dividend slashed

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 owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended IRESS 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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It’s just a number. And if we didn’t have 10 fingers the latest Apple Inc. (NASDAQ: AAPL) share price move wouldn’t be making global financial headlines this morning.

But we do have 10 fingers. And hence we long ago adopted the base 10 counting system. If you’ve ever watched young children doing their maths — or recall your own early days of addition and subtraction — that system makes imminent sense.

How does that tie into Apple’s share price?

Yesterday, overnight Aussie time, Apple’s share price nudged up another 0.13%. That was enough to see the company’s market cap hit the magical US$2 trillion figure. A nice round base 10 figure we can all wrap our heads around to mark a new milestone. At least in US dollars. In Aussie dollars Apple is now valued at A$2.8 trillion.

To give you a better idea of Apple’s explosive share price gains, its shares are up 120% since 20 August 2019. And despite plunging more than 30% during the COVID-19 market rout in February and March, Apple’s share price has gained 54% year-to-date. And the shares are up a jaw-dropping 106% since its 23 March low.

Apple is now the most valuable listed company in world. Its annual revenue outstrips that of nations like Portugal. And its market cap is equivalent to the entire output (as measured by GDP) of Australia over the course of some 18 months.

So, following this stellar year, are Apple shares still a good buy?

After handily beating their revenue forecasts in their third quarter report (released on 30 July), I expect that, long-term, Apple shares are ones you may want to hold in your portfolio.

Which will be the first trillion-dollar ASX company?

The share prices of ASX-listed companies have a long way to run before hitting $1 trillion market caps. (We’ll revert to Aussie dollars here.)

BHP Group Ltd (ASX: BHP) currently holds the reins as Australia’s biggest public company, with a market cap of $197 billion. With the exception of the big pandemic selloff, BHP’s share price has been in a solid upward trend since early 2016, up 154% since 22 January 2016. Over the past 12 months, the BHP share price is up 7%.

Rio Tinto Limited (ASX: RIO) comes in at number 2, with a market cap of $164 billion. Over the past 12 months, the Rio Tinto share price is up 18%.

But it’s the current number 3 player that may be the first to crack the $1 trillion ceiling.

CSL Limited (ASX: CSL) has been steadily marching up the ranks, even as the big four banks have been losing ground. CSL’s share price is up 29% since 20 August 2019, giving it a market cap of $142 billion.

CSL’s share price slipped in late morning trading today. But that comes after a 6.4% gain yesterday, helping propel the S&P/ASX 200 Index (ASX: XJO) to a 0.7% gain and a 5-month high.

After the stellar COVID-19 rebound, can ASX share prices keep rising?

The vast majority of Australian shares have enjoyed remarkable gains since the pandemic panic selling flipped into bargain hunting. You need look no further than the 37% gains of All Ordinaries Index (ASX: XAO) to see what I mean.

The question on many investors minds now is, how much further does the rally have to run? Or worse, has the share market overshot and are we looking at another leg down?

Now I’m not much at reading tea leaves. And I don’t have a working crystal ball. So, let’s instead polish off our copper ball and see what that may tell us.

Why copper?

You may have heard the term ‘Dr Copper’. That’s because the copper price trends can very often give you a good indication of the health of the global economy. Copper is a vital metal in new construction, used in wiring. It’s also a key element in electric vehicles.

And the price of copper is now up 16% over the past 12 months. And it’s up 44% since 23 March (there’s that date again!).

That certainly sounds like a healthy prognosis from Dr Copper on the growth prospects for the world economy. Which should spell good news for many ASX shares. Particularly, of course, the well-placed copper miners.

On the smaller end of the scale you’ve got companies like Aeris Resources Ltd (ASX: AIS), with a market cap of $88 million. Year-to-date, the Aeris share price is up 50%.

One of the larger companies producing copper is South Australia based OZ Minerals Limited (ASX: OZL), with a market cap of $4.7 billion. Oz Mineral’s share price is up 38% so far in 2020.

OZ Minerals managing director Andrew Cole points out the huge demand from China as the nation continues on its massive building and infrastructure projects, as quoted by the Australian Financial Review:

With China’s continued build out of their copper smelter capacity, they are hungry for copper supply. China doesn’t have many copper natural resources to exploit so they have to buy it in, so unlike wine where they produce some locally, unlike coal where they have vast amounts of brown coal in country, I am less concerned about China potentially impacting the copper side of the industry.

Not even Dr Copper always gets its forecasts right. But it’s certainly indicating the world is gearing up for a period of extended growth. And that should prove good news for the best placed ASX shares in every sector.

More reading

• Why CSL, Iress, Santos, & Webjet shares are dropping lower
• Sonic share price surges to record high as its profit results defy sceptics
• Apple to hit US$3 trillion by 2023, analyst predicts
• Want to own the FAANG stocks? Here are 3 ways you can
• Why it may not be too late to chase ASX reporting season record breakers

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended Apple. 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 Pacific Smiles Group Ltd (ASX: PSQ) share price has surged 10% higher following the release of its FY20 results today.

The group operates dental centres in Queensland, Australian Capital Territory, New South Wales and Victoria. The market for dental services in Australia is approximately $10 billion to $11 billion per annum.

How did the company fare?

Pacific Smiles achieved strong growth before the impact of the coronavirus pandemic. However, in the second half of FY20, the dental service took a significant hit on its overall results for the year. 

In the first half of FY20, underlying earnings before interest, taxation and depreciation (EBITDA) was up 15% to $12.9 million. Ultimately, underlying EBITDA was $23.5 million, up just 2.9% on the prior corresponding period (pcp). 

Similarly, patient fees in the first half of FY20 soared 14.5% to $105.4 million but ended the year down 0.6% to $186.3 million compared to FY19. 

During FY20, Pacific Smiles opened 5 new dental centres, bringing its total to 94 dental centres.

The Jobkeeper scheme provided $8.4 million in gross benefits with a net impact of $5.7 million to EBITDA.

Depreciation and amortisation expenses increased $1.6 million due to the acceleration of new centre developments in prior years. 

Pacific Smiles did not declare a final dividend.

Outlook for Pacific Smiles share price

The long-term strategy is to grow dental centres from 94 centres to more than 250, dental chairs from 383 to more than 800 and boost market share from 2% to more than 5%. Pacific Smiles has committed to adding a further 9 sites in FY21 to its number of centres.

Patient fee growth in June of 12.4% and 13.5% in July compared to the pcp followed the lifting of government restrictions in May. Same centre patient fee growth tracking at approximately 10.6% year-to-date (YTD) at 31 August. This has been impacted by Victorian restrictions and would be 19.6% YTD with Victoria excluded.

In addition, Pacific Smiles expects a patient fees growth of 15% and underlying EBITDA of approximately 15% growth year-on-year assuming a number of factors. These include Jobkeeper benefits for Q1 FY21 offsetting coronavirus underperformance, continued level 3 restrictions in Melbourne in 1H FY21, H2 FY21 trading without significant interruption from the coronavirus pandemic and the opening of approximately 10 new dental centres.

Melbourne metro dental centres are operational under level 3 government-mandated restrictions but at reduced opening hours and only for emergency procedures. 

In response to the FY20 results, Pacific Smiles share price has surged almost 10% higher to $1.60. It has a market capitalisation of $247 million.

More reading

• Coca Cola share price on the rise, despite mixed earnings report
• Spirit Telecom share price soars 7% on capital raising and acquisition news
• Why CSL, Iress, Santos, & Webjet shares are dropping lower
• After the stellar COVID-19 rebound, can ASX share prices keep rising?
• Iress share price dives 6% on half-year results

Motley Fool contributor Matthew Donald 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 Iress Ltd (ASX: IRE) share price has taken a dive this morning, down more than 6% in early trade after the company released its half-year results.

How did Iress perform for the half-year?

Earlier today, Iress released its report for the 6 months to 30 June 2020.

The company’s report was highlighted by a 12% surge in group revenue of $270.7 million. Despite the headline figure, Iress reported a 14% drop in net profit after tax for the half-year of $26.3 million. Group segment profit was also down 3% from the prior corresponding period to $71.9 million.

The company’s management cited the drop in net profit after tax was due to the impact of operating losses in its acquired business. In addition, Iress noted that an increase in annual leave expenses impacted the company’s bottom line. According to Iress, excluding these outliers would give the company a 4% increase in net profit after tax for the half year.

Despite the subdued result, Iress elaborated on the company’s strong underlying fundamentals. According to the company’s report Iress has a strong cash conversion rate of 134% and high level of recurring revenue.

Iress also noted that the company will be paying an interim dividend of 16 cents per share. However, given the uncertain trading conditions, the company was not able to provide financial guidance for the full year.

 What is the outlook for Iress?

Iress is a technology company that provides software to the financial services industry, providing trading and market data and investment management information. The company’s software is used by more than 9,000 businesses and boasts 500,000 users in Asia Pacific, Europe, North America and Africa. 

In its half-year report, Iress highlighted the resilience of its business model, which is predominantly based on recurring subscription revenue. The company also noted that it is participating in significant tenders to superannuation funds. If successful, Iress expects these will positively impact revenue in 2021 and beyond. The company noted a strong pipeline of sales opportunities and is focused on building on its strengths. 

Iress also noted that the company is well capitalised to take advantage of future opportunities. The company completed a $170 million capital raise earlier this year in order to fund its proposed acquisition of OneVue Holdings Ltd (ASX: OVH), whilst also providing additional flexibility to its balance sheet.  

Foolish takeaway

At the time of writing, the Iress share price is trading 6.59% lower for the day at around $10.49. Shares in the company have bounced slightly after hitting an intra-day low of $10.47. The Iress share price has struggled in 2020 and is currently trading more than 19% lower for the year.

More reading

• Why CSL, Iress, Santos, & Webjet shares are dropping lower

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has recommended IRESS 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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At lunch on Thursday the S&P/ASX 200 Index (ASX: XJO) is on course to record a disappointing decline. The benchmark index is currently down 1% to 6,104.3 points.

Here’s what is happening on the market today:

Afterpay share price hits record high.

The Afterpay Ltd (ASX: APT) share price has hit a record high of $82.00 today. Investors have been buying the payments company’s shares following a surprise upgrade to its earnings guidance for FY 2020. Due to a better than expected Net Transaction Loss (NTL) as a percentage of underlying sales, Afterpay expects its EBITDA to be $44 million. This compares very favourably to its previous EBITDA guidance of $20 million to $25 million.

Qantas takes $4 billion revenue hit from COVID-19.

The Qantas Airways Limited (ASX: QAN) share price is trading lower today following the release of its full year results. Qantas revealed that the COVID-19 pandemic has impacted its revenue by $4 billion during the second half. This ultimately led to the airline operator posting a statutory loss before tax of $2.7 billion. Management advised that the majority of this loss is non-cash and includes aircraft write downs.

Webjet sinks lower after major loss.

The Webjet Limited (ASX: WEB) share price is sinking notably lower today after the release of its full year results. For the 12 months ended 30 June 2020, the online travel agent posted a 27% decline in revenue to $266.1 million and a statutory net loss after tax of $143.6 million. This statutory result includes one-off items totalling $117.7 million. These include $40 million debtor write-offs, $14.6 million associated with the closure of Webjet Exclusives, and a $20 million impairment of intangibles from the closure of Online Republic Cruise.

Best and worst ASX 200 shares.

The best performer on the ASX 200 on Thursday is the IDP Education Ltd (ASX: IEL) share price by some distance. Its shares are up 27% today after the release of a surprisingly strong full year result. Going the other way, the worst performer has been the Webjet share price with a 11% decline. This follows the release of its aforementioned full year results.

More reading

• Why CSL, Iress, Santos, & Webjet shares are dropping lower
• Sonic share price surges to record high as its profit results defy sceptics
• Why Afterpay, Codan, IDP Education, & Sonic shares are charging higher
• Qantas reveals routes that are busier now than before Covid-19
• Afterpay share price rockets to record high after guidance upgrade

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 Idp Education Pty Ltd. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T 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 Sonic Healthcare Limited (ASX: SHL) share price is outperforming this morning after its results allayed a key concern of its critics.

Shares in the medical diagnostic services group jumped 2.3% to a record high of $35.50 when the S&P/ASX 200 Index (Index:^AXJO) slumped 1% at the time of writing.

Even healthcare sector heavyweights were swept up in today’s sell-off. The CSL Limited (ASX: CSL) share price tumbled 3.2% to $302.10 while Ramsay Health Care Limited Fully Paid Ord. Shrs (ASX: RHC) share price and Healius Ltd (ASX: HLS) share price shed around 1% each.

Improved profit and sales performance

Sonic is outperforming after posting stronger sales and earnings. Group revenue increased 11% to $6.86 billion while underlying net profit improved by 7% to $552 million in FY20.

Another standout was the 26% jump in operating cash flow to just over $1 billion, thanks in large part to prepayment of US Medicare testing fees.

Further, management held its final dividend steady at $0.51 a share, although when combined with the small increase in its interim dividend, the total payment for FY20 inched up 1.2% to $0.85.

Share price jumps as key worry laid to rest

You might think medical stocks can’t put a foot wrong during the COVID-19 mayhem, but that couldn’t be further from the truth.

Sceptics believed the drop in Sonic’s core business will collapse as people avoided seeing their doctor for regular check-ups and other ailments.

Routine screening and diagnostics are the bigger profit drivers for the group as it collects fatter margins than coronavirus testing. So, the fear was that any surge in COVID-19 tests wouldn’t be enough to save Sonic’s bottom line.

However, Sonic proved the disbelievers wrong. While demand for its core services were hit hard at the onset of the pandemic, it’s rebounded strongly. Its performance in several of its key markets, including those in Europe are holding up relatively well.

Margin pressure vs. revenue surge

The tipping of the scale towards COVID testing explains why there was some pressure on group margins. This is evidenced by the slower rate of growth for its bottom line.

But that’s a small point. Sonic showed that it can have its cake and eat it thanks to cost cutting, while its Aurora acquisition at the start of 2019 also supplemented the growth.

Can the good times last for the SHL share price?

What’s more, the growth momentum is carrying through into FY21. Management said that revenue in July and August is “substantially higher” than historical rates.

This is more to do with COVID testing than its base business, although the latter did experience a 5% revenue increase in July for most countries over the same month last year. Only the US and UK are down, but there are signs of a turnaround.  

However, it might be too early to think that the current financial year will be a blockbuster earnings event for Sonic. Investors can’t necessarily bank on the big upsurge in revenue to last for all of FY21 given that no when can predict how and when the pandemic will end.

More reading

• Why CSL, Iress, Santos, & Webjet shares are dropping lower
• After the stellar COVID-19 rebound, can ASX share prices keep rising?
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Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has recommended Ramsay Health Care Limited and 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 IPH Ltd (ASX: IPH) share price is this morning falling lower following the release of the company’s full year reports. At the time of writing, the IPH share price has tumbled 5.46% to $7.97.

How did IPH perform in FY 2020?

The IPH share price has fallen lower despite the company releasing relatively strong financial results for the FY 2020. IPH delivered strong revenue of $370.1 million, up a huge 43% despite the challenging market conditions. Revenue was largely driven by Asian IP which grew 6%. In contrast Australia and New Zealand revenue declined 5% although this was largely due to the FY19 Xenith results being written off.

In further good news for the company, it reported statutory NPAT of $54.8 million representing in a 3% increase on the prior corresponding period.

The IPH results demonstrate the ongoing resilience of the business despite the challenging market conditions caused by COVID-19 in the second half of the year. The business remains well placed with continued strong cash generation, a robust balance sheet with enhanced financial flexibility and no refinancing commitments until 2022.

As a prudent measure, IPH drew $20 million from existing facilities in March 2020 and, as a result, had cash on hand of $82.9 million at year end of which $12.7 million was subsequently repaid in August 2020.

Foreign currency also plays a large part in the company’s earnings thanks to its diversified earning portfolio. IPH seeks to reduce this risk through hedging against specific FX risks since a 1-cent movement in the AUD/USD exchange rate can have a $1.9 million effect on revenue. However this current policy is under review.

Dividend

For FY2020, IPH declared a final dividend of 15 cents per share, fully franked, bringing the full year dividend to 28.5 cents per share. This was up 14% on the prior year.

The full year dividend is in line with the board’s dividend policy to pay 80-90% of cash NPAT as dividends.

What’s next for the IPH share price?

For FY21, IPH aims to continue leveraging its expanded focus on Asia, especially in China, in order to develop a network effect for the company. It also aims to continue margin expansion and increase operational efficiencies across the group.

IPH does note, however, that there will be continued disruptions from COVID-19 and thus it will continue to adopt a prudent approach to managing the business in what is a challenging environment. In response, the company will focus on developing its digital platform for increased usability.

Unfortunately for IPH shareholders, the weakening of the US dollar is also likely to affect reported revenues moving forward.

The IPH share price has recovered 26.9% from its March low but is 3.2% down in year-to-date trading. The IPH share price has fallen 15.7% over the past 12 months.

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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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