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The Saracen Mineral Holdings Limited (ASX: SAR) share price has been a solid performer on Tuesday.

In morning trade the gold miner’s shares are up over 2% to $5.74.

Why is the Saracen share price shooting higher?

As well as getting a boost from a jump in the spot gold price overnight, the Saracen share price was given a lift by a positive announcement this morning.

That announcement revealed its new seven-year production outlook which will culminate in Saracen achieving 800,000 ounces a year in FY 2027.

This compares to the annual production of 520,414 ounces it achieved in FY 2020, representing a 53.7% increase.

This follows a separate announcement with its joint venture partner, Northern Star Resources Ltd (ASX: NST), in relation to its KCGM project.

That announcement reveals JORC compliant reserves of 9.7M ounces at 30 June 2020, compared to a non-JORC compliant estimate of 6.3M ounces at 31 December 2019.

How will it get there?

The first step to achieving this will be growing its production to between 600,000 ounces to 640,000 ounces in FY 2021. It expects to achieve this with an all-in sustaining cost (AISC) of A$1,300 an ounce to A$1,400 an ounce.

It will also be underpinned by FY 2021 growth capital investment of A$429 million. Management advised that this is anticipated to be the peak year for investing in growth. It will also invest A$55 million into exploration activities in FY 2021.

A new era of growth.

Saracen’s Managing Director, Raleigh Finlayson, believes the company is on track to continue the its long record of growing its production and expanding its inventory.

He commented: “Saracen’s strategy of making opportunistic acquisitions and then unlocking their full value through exploration and development has created substantial value for shareholders for many years.”

“This same strategy is now underpinning a new era of growth for the Company, as shown by the impressive growth in the Resources and Reserves and the forecast production at our recently-acquired KCGM project,” Mr Finlayson added.

Once again, the company’s focus remains in Western Australia.

The managing director explained: “As in the past, our next round of substantial growth will come totally from within Western Australia, ensuring our future-proofing strategy continues to benefit from the certainty which comes from operating solely in a tier-1 location.”

“We are in a superb position given the strong gold price, our growing production profile, our outstanding working relationship with Northern Star Resources at the world-class KCGM project and 17Moz of Resources in WA,” he concluded.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Warren Buffett is buying gold shares and top fundies assess ASX share price moves
• Evolution Mining and 1 other ASX gold share in the buy zone
• Why November could be the best time to re-join the gold bull run
• Take a look at last week’s worst performing 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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The Abacus Property Group (ASX: ABP) share price is on watch this morning following the release of its FY 2020 results.

Abacus is a diversified property group that specialises across Australia’s commercial property markets. It invests in a range of activities including office, retail and industrial properties, and self-storage facilities.

Profit down sharply

Abacus reported that group statutory profit had declined significantly by 58.2% during FY 2020 to $84.7 million. Abacus funds from operations (FFO) came in at $124.6 million, down 3.6% from $129.2 million in the prior financial year.

On a positive note, the property group has maintained a strong balance sheet during the FY 2020 period. This was backed by healthy levels of liquidity and gearing that are currently below its target gearing level. The operating performance of both the office and self storage portfolios was strong, especially in light of the coronavirus pandemic challenges.

Abacus noted that 87% of its total assets were now deployed in office and self-storage investments.

Funds from operations (FFO) per security came in 19.38 cents. This was a decline of 13% from the 22.28 cents recorded in FY 2019. Distribution per security (DPS) for Abacus was flat on the prior year, coming in at 18.50 cents.

The distribution payout ratio was recorded as 95% of FFO, while gearing was 26.5%. The latter was 240 basis points higher than levels in FY 2019.

Abacus managing director Steven Sewell said:

“Following a pivotal year of capital deployment into our key sectors of office and self-storage, Abacus is positioned as a strong asset-backed, annuity style investment house focused on the ownership and management of our assets. A combination of established and new collaborative joint ventures has created enduring investment opportunities and facilitated our capital recycling program.”

Market Outlook for FY 2021

Abacus noted that it remains optimistic on its AREIT market positioning in both the office and self-storage sectors over the next 12 months. At the same time however, the property group acknowledged continuing market uncertainty due to the coronavirus pandemic. 

Abacus believes that a combination of active asset and development management along with good customer communication, will result in attractive risk adjusted returns over the medium to long-term.

The Abacus board anticipates that its distribution for FY 2021 will result in a payout ratio of between 85% to 95% of FFO.

How has the Abacus share price performed lately?

The Abacus share price trended sideways during the 12 months prior to late February. It then fell sharply in the following month during the early phase of the coronavirus pandemic.

The Abacus share price has only made a slight recovery since then and was $2.63 at close of trade yesterday.

More reading

• ASX shares to buy with $10,000 in August
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• Reliable ASX dividend shares still exist
• 4 trends to invest in before August earnings season
• 2 cheap value shares to buy this week

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 ARB Corporation Limited (ASX: ARB) share price surged to a two-year high this morning on the back of its profit results.

The ARP share price surged 4.5% in early trade to $22.88 when the S&P/ASX 200 Index (Index:^AXJO) was trading only a little above breakeven.

The four-wheel drive accessories group not only managed to lift FY20 sales and profit during a challenging period, but it will maintain its full year dividend payment.

Flat is the new up for dividends

This is likely to be warmly welcomed by shareholders as ASX stocks have been cutting dividends during this reporting season. Westpac Banking Corp (ASX: WBC) is the latest to disappoint on this front.

But investors can expect a double dose of dividends from ARB. It declared a final dividend of 21 cents a share to be paid in October and said it will also pay its deferred February interim dividend of 18.5 cents at the same time.

ARB profit results beat the downtrend

This isn’t the only pleasing piece of news. The group reported a 4.6% increase in FY20 total revenue to $467 million and a 0.3% improvement in net profit to $57.3 million.

Not a bad result given that sales came to a crashing halt in April and May due to COVID-19 before rebounding sharply in June.

What’s driving sales

The growth in the top-line was largely driven by recent acquisitions, including Beaut Utes and PRO-FORM Plastics.

The Australian Aftermarket division also increased modestly despite new vehicle sales falling for 28 months straight with the pandemic exacerbating the most recent periods.

It’s Original Equipment Manufacturer (OEM) division was the main drag as sales in that part of the group tumbled 12.9% in the last financial year.

Promising signs for FY21

But investors may be willing to overlook this as management painted a more bullish outlook than I was expecting.

While ARB refused to provide any specifics about the next 12 months as COVID-19 turned forecasting into a tarot card reading, it did point out a few promising signs.

Firstly, the new financial year kicked off on a strong footing with July sales hitting a record. The group also plans to add three new ARB stores to its current network of 67. These stores are an important growth driver for ARB.

Further, its struggling OEM business may see an improvement in FY21 as management signed several new contracts with customers that will commence in the next six months.

ARB also holds a strong balance sheet with $41.6 million in cash (an increase of $33.1 million) and can access another $55.6 million in debt.

Some small negatives in ARB’s results

But it’s not all good news. The coronavirus disruption to its manufacturing operations means it’s now struggling to fulfil orders and the group needs more time to get its global plants and supply chains back to pre-COVID-19 conditions.

Inventory management is an emerging theme during this reporting season, but only for ASX stocks that are performing well during the crisis. JB Hi-Fi Limited (ASX: JBH) is another example as it runs low on stock due to high demand for IT equipment and whitegoods during the lockdown.

Another possible negative from ARB’s results is how government wage subsidies have kept its profits in the black.

The group received $9.5 million from the Australian and New Zealand governments during the pandemic, which helped pad its bottom line.

More reading

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• Why Kogan and these ASX shares just hit record highs

Motley Fool contributor Brendon Lau owns shares of Westpac Banking. Connect with me on Twitter @brenlau.

The Motley Fool Australia has recommended ARB 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 Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price could be on the move today, following the release of the company’s FY21 trading update.

Fisher & Paykel Healthcare is a leading designer, manufacturer and marketer of products and systems used for use in chronic and acute respiratory care, surgery and treatment of obstructive sleep apnea. The company’s products are sold worldwide. 

Trading update

Strong demand has continued for the company’s hospital respiratory care products due to the ongoing spread of the coronavirus pandemic around the world. 

For the first 4 months of the company’s financial year to the end of July 2020, hospital hardware sales have increased with 390% constant currency revenue growth compared to the prior comparable period (pcp). Additionally, hospital consumables revenue has grown 48% and overall hospital product group revenue has grown 91% compared to the pcp and in constant currency terms. 

Global sales of invasive ventilation and Optiflow consumables in July have returned to similar levels seen in April. Revenue in geographic areas is being impacted by the amount of infections. More than half of Fisher & Paykel’s Airvo (humidified high flow system) hardware sales are outside North America and Europe this financial year. 

Constant currency revenue growth in obstructive sleep apena (OSA) for the first 4 months of FY21 was 4% compared to pcp. The growth in home respiratory support is more than offsetting a decline in OSA flow generators. Homecare revenue growth is 5% in constant currency terms compared to the pcp.

Outlook

Significant uncertainty about the extent and duration of the impact of the coronavirus has led Fisher & Paykel to make some assumptions regarding its FY21 results.

The assumptions include global hospitalisations requiring respiratory support to steadily return normal by the end of the calendar year and countries around the world continue to build respiratory care infrastructure. Additionally, it is assuming sleep apnea diagnosis rates are reduced for the year and freight costs remain elevated, resulting in a 200 basis points reduction in gross margin in constant currency for the year.

 “On this basis and at current exchange rates, full year operating revenue for the 2021 financial year would be approximately NZ$1.61 billion and net profit after tax would be approximately NZ$365 million to NZ$385 million” said Managing Director and CEO Lewis Gradon.

About the Fisher & Paykel share price

In its FY20 results released to the market on 29 June 2020, operating revenue was NZ$1.26 billion and net profit after tax was NZ$287.3 million.

The Fisher & Paykel share price has been a major beneficiary from the demand for its products during the coronavirus pandemic. As a result, its share price has surged 111.42% in the past year and is currently trading at $31.84.

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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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Alphabet‘s (NASDAQ: GOOGL) (NASDAQ: GOOG) Google published an open letter to Australians on Monday, warning that a proposed new law in the country – which would require the company to pay for news content that appears via its search – could derail the free search and YouTube video services Google offers in Australia.

The search leader has also suspended a licensing agreement it had reached with Australian publishers earlier this year that paid select news publishers for access to their content. 

“We need to let you know about new Government regulation that will hurt how Australians use Google Search and YouTube,” the company said in an open letter to Aussies that was signed by Mel Silva, Google’s managing director in the country. 

The letter went on to say that the proposed law, the News Media Bargaining Code, “would force [Google] to give an unfair advantage to one group of businesses – news media businesses – over everyone else who has a website, YouTube channel or small business.”

As a result of the proposal, Google said it could no longer guarantee its free search and YouTube services in Australia.

Google also went on the offensive, publishing a blog to its YouTube creators and artists in the country, saying that it would be forced to “give large news publishers confidential information” that would give them an advantage in terms of search rankings on YouTube, meaning content creators would receive fewer views and therefore earn less money. 

Not only would the new legislation create an “uneven playing field” but would also grant the big news organisations access to viewer data.

Australian regulators hit back, with the Australian Competition and Consumer Commission saying Google’s characterisation “contains misinformation” about the proposed law. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena owns shares of Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool Australia has recommended Alphabet (A shares) and Alphabet (C shares). 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Beach Energy Ltd (ASX: BPT) share price surged higher to start the week after a solid full-year earnings announcement.

What did Beach Energy announce?

Despite the challenges for oil and gas producers, Beach reported a 9% drop in FY20 production to 26.7 million barrels of oil equivalent (MMboe).

That was just shy of Beach’s guidance for 27-28 million barrels as net profit fell 13% to $500.8 million.

Net tangible asset backing climbed to $1.19 per share, up from $1.02 per share. The Aussie producer also managed to pay a 1.0 cents per share final dividend.

That strong result sparked a 7.1% rally in the Beach Energy share price yesterday. In fact, the ASX energy share led the S&P/ASX 200 Index (ASX: XJO) gainers list.

It’s an impressive feat for an Aussie energy producer in the current market. The coronavirus pandemic and oil price war have hit the producers like Beach Energy quite hard.

However, the August earnings result and 5-year outlook appear to be better than many investors were pricing in.

Did Beach Energy provide any guidance?

Unlike many Aussie companies, Beach also provided FY21 guidance despite current challenges.

The group expects to report underlying earnings before interest, tax, depreciation and amortisation (EBITDA) down 10-20% to $900-1,100 million.

The 5-year free cash flow outlook remains strong despite being downgraded from $2.7 billion to $2.1 billion.

I think tough conditions and a lower oil price will hurt short-term earnings and the Beach Energy share price.

However, Beach expects production of 26.0-28.5 MMboe in FY21 despite a planned 30% reduction in capital expenditure.

Is the Beach Energy share price in the buy zone?

I think there are a lot of positives to take away from yesterday’s result.

Based on the closing share of $1.58, Beach paid out a 1.3% dividend yield. That’s not enormous but I still think it’s a positive given the challenges for ASX energy shares.

The Beach Energy share price is also trading at a price-to-earnings (P/E) ratio of just 6.3.

That could mean now is time to snap up a speculative bargain for investors willing to roll the dice.

More reading

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• BHP share price on watch as final dividend slashed by 30%
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 drops 0.8%, JB Hi-Fi jumps 4.5%

Motley Fool contributor Ken Hall 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 Megaport Ltd (ASX: MP1) share price is on watch this morning after the network-as-a-service provider announced the upcoming release of Megaport Virtual Edge. The product innovation will allow customers to tap into Megaport’s platform to deploy and extend network functions in real time, without deploying hardware. 

What does Megaport do? 

Megaport has more than 1,800 customers that rely on its products to power their digital businesses. The company provides bandwidth which allows users including Facebook, Amazon, and Tesla to connect to cloud services and data centres. Monthly recurring revenues have increased more than four-fold since FY17 as ecosystem richness drives greater service connection opportunities. 

What did Megaport announce?

Megaport says the development of Megaport Virtual Edge marks a transformation point for the company. The new technology empowers customers to build a unified, multi cloud network architecture that scales as business needs grow. SD-WAN (software defined–wide area network) capabilities are a feature of Megaport Virtual Edge, which allows companies to build higher performance wide area networks using lower cost, commercially available internet access. This allows more expensive wide access network technologies to be replaced. 

“By creating a platform that will bridge various network access types directly to Megaport’s SDN, we have effectively made it possible to connect to our leading ecosystem of service providers and data centres from anywhere in the world,” said Bevan Slattery, founder and chair of Megaport.

“This will put the power of elastic interconnection in the hand of more businesses around the globe,” he added.

How has Megaport been performing? 

Megaport is due to release its full-year result this Wednesday. Investors will be expecting big things from the company – the Megaport share price is up 70% over the past year. Revenue in the June quarter was $17 million, a 12% increase quarter-on-quarter and 66% increase year-on-year. 

Megaport has been expanding its network footprint to new markets while also deepening reach within existing metros. The company established a presence in Denmark and Spain during the fourth quarter, which brings the Megaport platform to 23 countries and 128 cities globally. 

Megaport CEO Vincent English commented: “Megaport has continued its strong growth momentum, with solid revenue results throughout Fiscal Year 2020. Quarterly revenue was up 12% on the previous quarter to $17 million, and monthly recurring revenue reached a new high of $5.7 million, driven by existing customers.” 

Foolish takeaway 

Megaport has now delivered 17 consecutive quarters of growth in annualised revenue, and the release of this latest product should support continued revenue growth. All eyes will be on the Megaport share price as investors digest today’s news and await full-year results tomorrow.

More reading

• How investing in ASX shares could help you grow $10,000 into $100,000
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• Why I would buy Megaport and this exciting mid cap ASX share
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Kate O’Brien owns shares of Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Facebook, MEGAPORT FPO, and Tesla and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon, Facebook, and MEGAPORT 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 Coles Group Ltd (ASX: COL) share price will be in focus on Tuesday after the supermarket giant released its eagerly anticipated full year results.

How did Coles perform in FY 2020?

For the 12 months ended 30 June, Coles reported sales revenue growth of 6.9% to $37.4 billion. This was driven by growth across all segments and particularly strong comparable store sales growth across the Supermarkets business. The fourth quarter represented the business’ 51st consecutive quarter of comparable store sales growth.

During the year Coles achieved Smarter Selling cost savings in excess of $250 million. Though, these savings were offset by a one-off increase in investment in COVID-19 related expenses.

In respect to earnings, Coles delivered earnings before interest and tax (EBIT) of $1,387 million and a net profit after tax of $951 million. This represents a 4.7% and 7.1% increase, respectively, over the prior corresponding period.

As a comparison, a recent note out of Goldman Sachs reveals that it was forecasting total sales of $37.5 billion and EBIT of $1,392.4 million. This means Coles’ result was broadly in line with expectations.

In light of its strong performance, a fully franked final dividend of 27.5 cents per share was declared. This was an increase of 14.6% on the prior corresponding period and lifts its full year dividend to 57.5 cents.

What were the drivers of its result?

Over the period the key Supermarkets business posted a 6.8% increase in revenue to $32,993 million and a 10.7% increase in EBIT to $1,310 million. This was driven largely by increased demand during the third and fourth quarters during lockdowns and the closure of restaurants and cafes.

The Liquor segment had a strong year for sales but delivered flat profits. Sales increased 8% over the 12 months to $3,308 million, but EBIT remained flat at $120 million.

It was a similar story for its Express stores, which reported a 5.6% increase in sales to $1,107 million but a loss of $16 million. The latter was down from a $50 million profit in FY 2019.

Management commentary.

Coles Group CEO, Steven Cain “In June 2019, Coles set out a refreshed strategy to transform our business and lay the foundations to succeed in our second century. Since that time, we have been presented with a number of unforeseen challenges including drought, devastating bushfires, and of course the ongoing COVID-19 global pandemic.”

“This has provided the greatest test of our lifetime and we are experiencing things we never thought we would see in a supermarket, or for that matter Australia. Coles for its part has become a designated “essential service”, playing an important support role during these crises, and it will also play an important role as the nation recovers and returns to growth,” he added.

FY 2021 outlook.

Management notes that it is operating in a highly uncertain environment, but believes the company is in a strong position to take advantage of opportunities as they arise.

Especially after starting the new financial year in a positive fashion. It explained: “In the first six weeks of the first quarter of FY21, Supermarkets comparable sales remain broadly in-line with the levels achieved in the second half. There is significant variation between states and between stores locations within states as a result of the continuing impact of COVID-19 restrictions around Australia.”

Online sales have also been growing strongly. Following a significant increase in capacity in the second half, they are up 60% in the first six weeks of FY 2021. This growth is being driven largely by consumers in Victoria.

As for margins, they have remained consistent with what the company achieved in FY 2020 despite incurring “significant incremental COVID-19 costs in the early part of FY21 in relation to additional safety.”

Liquor sales have remained elevated and Express fuel volumes are broadly in line with the June exit rate.

Finally, having made a strong start to the Smarter Selling program in FY 2020, Coles continues to target its $1 billion cost-out goal between FY 2020 and FY 2023. In FY 2021, the company will continue to focus on realising cost-out opportunities. Though, the timing will be dictated, in part, by COVID-19.

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of 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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ASX tech shares seem to be all the rage right now. The Nextdc Ltd (ASX: NXT) share price has been surging higher in 2020 to lead the S&P/ASX 200 Index (ASX: XJO) outperformers.

But it’s not just the Aussie data centre operator that I’ve got my eye on. I like a few of the top ASX tech shares right now but the key is to find those that are still good value.

Here are a few of my top picks that I like even at their current prices.

Nextdc and 2 other ASX tech shares to buy

I really like ASX tech shares with a strong underlying story. For Nextdc, I think that’s the spectacular growth in demand for off-site data storage and security.

Australia is transitioning towards a semi-permanent work from home setup. That means more companies are going to look to use data centres as a core part of their business operations.

Nextdc is an incumbent in the industry and is well-placed for future growth. The company already provides connectivity and data centre services alongside technical support.

With the growth of cloud connectivity and collaboration tools, I think the ASX tech share may continue to climb in 2021.

Nextdc aside, I like the look of Xero Limited (ASX: XRO).

The Xero share price has jumped 15.3% higher this year and isn’t far off its all-time high.

Google Finance suggests the ASX tech share currently trades at a price-to-earnings (P/E) ratio of 4,309.9. We won’t get to see the Kiwi accounting software group’s earnings until November. 

That means it’s something of a gamble but I wouldn’t consider Xero a relative value play. Xero to me has long-term potential to transform the business world with simple accounting.

I think strong customer retention and acquisition is the key here. If Xero can continue to land big clients and deliver strong earnings, it could crack the $100 per share barrier.

Finally, Altium Limited (ASX: ALU) is on my watchlist after its full-year earnings result yesterday.

Altium reported strong revenue growth of 10% to $189 million and continues to be a printed circuit board software leader.

The ASX tech share increased its subscriber base by 17% and posted a record earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 40%.

I think this strong growth profile underpins the future potential of the Altium share price despite its lofty valuation.

Foolish takeaway

These are just a few of the ASX tech shares that I like at their current prices. 

I’m sure we’ll see more volatility in the years ahead, but I think a solid underlying business is the key to long-term success.

More reading

• Is the Beach Energy share price a buy?
• Netwealth share price on watch as net profit surges 22%
• BHP share price on watch as final dividend slashed by 30%
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 drops 0.8%, JB Hi-Fi jumps 4.5%

Ken Hall 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 Altium. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. 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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Construction giant Lendlease Group (ASX: LLC) reported its results yesterday, posting a net loss of $310 million in FY20. Like most companies with international operations, this has been partly due to its exposure to markets with mandated coronavirus shutdowns. However, the company also posted a $368 million cost for the planned exit from its engineering division. In addition, its investment portfolio also suffered a reduction in valuation due to market conditions. 

Lendlease financials

While the company did post a $310 million dollar statutory loss after tax, $212 million was in 2HFY20. This underlines the impact from the coronavirus. In addition, about 207 workers had tested positive to the virus but fortunately none had died. However, its core business delivered a profit after tax of $96 million. The company’s core business is the construction, investment and development of real estate properties.

Impacts to production came mainly due to mandated shutdowns, reduced productivity in construction, and delays in conversion to new projects. Moreover, some of these impacts will affect 1HFY21. In particular the exit costs for the sale of the engineering business are likely to blow out to $550 million, which is the top end of previous guidance estimates. 

Despite the poor conditions, the company managed to complete several large scale projects and initiatives. For example, it completed the development of Paya Lebar Quarter, Singapore, adding $3.3 billion of funds under management. It also listed the Lendlease Global Commercial REIT in Singapore. It will also retain 3 engineering projects: NorthConnex, the Melbourne Metro Tunnel, and Kingsford Smith Drive. 

At the time of writing, the company has a very strong balance sheet. Its 5.7% gearing is very low for any company in the real estate sector. Moreover, it has a total liquidity of $5.8 billion, which is $1.6 billion in cash, and $4.2 billion in undrawn facilities

Strategic position

The company has been able to fortify its core business during the year. Its development pipeline is up by 48% to $113 billion, with 2 additional major urbanisation projects secured. These projects have a total estimated end value of approximately $37 billion. They are Thamesmead Waterfront in London for $15.1 billion, and the San Francisco Bay area project for $21.8 billion. 

The company has also secured investment partner initiatives including the entire precinct for the Milano Santa Giulia in Milan. In addition, it has secured partnerships for the Victoria Cross over station development in Sydney, and Barangaroo South: One Sydney Harbour Tower 1. The estimated development end value of these projects is $7 billion.

Lastly, Lendlease has withdrawn its services business from sale until such time as the market improves. Even though this is part of its non-core business, it has also secured new work worth $1.4 billion.

Lendlease managing director and CEO, Steve McCann said:

Notwithstanding the challenging environment, the Group advanced its strategic agenda in FY20. Significant progress was made on growing and converting the development pipeline, including securing additional major urbanisation projects, achieving important planning milestones and creating new investment partnerships to support projects moving into delivery. The Group has made good progress in finalising the sale of the Engineering business.

Foolish takeaway

Lendlease is truly one of the world’s giant construction companies. The mandatory shutdowns that followed the rapid onset of Covid-19 caught the company unprepared. Nevertheless, it has strengthened its balance sheet, filled up its development pipeline, and secured new work worth billions. I think the company is likely to see a recovery of its business, rather than a prolonged downturn. 

With a current market valuation of $8.04 billion it is selling at approximately book value per share. However, this doesn’t take into account the healthy pipeline of work it has in front of it. The current Lendlease share price is selling at a price-to-earnings ratio of 8.62, and has a trailing 12-month dividend yield of 5.14%, I think Lendlease is an attractive opportunity for solid dividend payments and moderate share price growth over the next 3–5 years. 

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Motley Fool contributor Daryl Mather 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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