Final week of earnings: Woolworths, Ramsay and Harvey Norman

Financial journalist and commentator on 3AW and Sky Business
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With the last week of the reporting season upon us, the traditional last-minute rush from many of the market’s minnows will keep the Australian Securities Exchange (ASX) busy right up until the close of business on Friday.

But the last week does have its share of market luminaries, led by Woolworths on Wednesday: analysts are not expecting the retail giant to shoot the lights out, looking for a lift of about 7% in earnings per share, and a 3% boost to the dividend.

On the same day, private hospital operator Ramsay Health Care is expected to show further evidence of why it is regarded as a market darling, lifting both earnings and dividend by about 30%.

Thursday will see financial services heavyweight, Perpetual, unveil what is expected to be a very healthy result, with earnings up by 50%-plus and the full-year dividend projected to rise by one-third.

Retailer Harvey Norman also reports on Thursday, in what is expected to be a healthy full-year result, with earnings up 42% and the dividend boosted by 16%.

Conversely, look out for thee losses from airlines Qantas (Thursday) and Virgin Australia (Friday). They will be embarrassed by what is expected to be a strong profit performance from Air New Zealand (Thursday).

Generally, however, the reporting season has generally met expectations. Checking in again with Shane Oliver, head of strategy and chief economist at AMP Capital, the “bottom line” is that the June half earnings results have turned out nowhere near as bad as many feared.

In fact, says Oliver, the profit results overall are looking pretty good: 55% of companies have exceeded expectations (compared to a norm of 43%), which is the best result in nine years. 69% of companies have seen their profits rise from a year ago (compared to a norm of 66%); 68% of companies have increased their dividends from a year ago (up from around 60% in the last two years); and 59% of companies have seen their share price outperform the market on the day they released results, which is the best result in four years.

Oliver says the key themes have been continued strength for resources, although of the majors, BHP was over-shadowed by Rio Tinto, which more than doubled its reported half-year profit. BHP Billiton reported a 23% rise in full-year net profit, to $US13.8 billion, on the back of $US67.2 billion in revenue, up 2% on last year.

BHP announced that it would hive off its aluminium, coal, manganese, nickel and silver assets into a separate company, leaving it with the core operations of iron ore, copper, coal petroleum and potash businesses. But BHP shares fell sharply after the profit announcement of the spin-off, because the company – hindered by lower iron ore prices – did not announce a share buyback.

Oliver says BHP’s numbers saw overall resources profit expectations for the full-year downgraded slightly, from 28% growth to 27%, but that was still enough to generate 12% profit growth across the market, with banks’ profit up 9% and the industrial companies lifting earnings by about 5%.

Dividends, cash and capital management have been the major themes of the season: investment bank Goldman Sachs expects the companies in the S&P/ASX200 index to pay a staggering $70 billion in dividends in FY14 – making $133 billion over the last two financial years.

Goldman Sachs says that in the decade before the financial crisis, the average Australian industrial company paid out 30% of its free cash flow in dividends and reinvested the rest. The ratio is now closer to 50:50.

And while dividends are seen as having grown strongly in FY14, reflecting investor demand for income and corporate confidence in earnings prospects, Goldman Sachs points out that just seven companies generated 70% of the $6.2 billion increase in dividends paid for the year: Commonwealth Bank, Suncorp, ANZ, National Australia Bank, Fortescue Metals, Rio Tinto and BHP. That does not exactly reflect an across-the-board stronger economy.

In fact, this reporting season continues the trend of recent years, in that top-line (revenue growth) has been much harder to come by for companies than bottom-line (net profit growth) – which they are able to show by hugely determined efforts to take costs out of their businesses.

In fact, broking firm Citgroup – having studied the numbers from 152 companies – reckons revenue (on an aggregate basis) has actually fallen this reporting season, by 1.1%. A really good performance on cash conversion (which measures the proportion of profits that are converted to cash flow) is allowing companies to boost dividends – up 10.8% for industrial companies in FY14 – but ultimately, corporate Australia needs to see actual revenue growth, and see it sustained.

Here is a heads-up of major company results to look out for this week, with consensus market expectations from FN Arena:

TUESDAY

Ainsworth Game Technology (AGI)

Consensus earnings per share (EPS): 21 cents, +31%
Consensus dividend per share (DPS): 10.5 cents, +31%

Austbrokers (AUB)

Consensus earnings per share (EPS): 59.3 cents, –17.8%
Consensus dividend per share (DPS): 38 cents, +7%

AWE (AWE)

Consensus earnings per share (EPS): 5.3 cents, +37.2%
Consensus dividend per share (DPS): nil, unchanged

Billabong (BBG)

Consensus earnings per share (EPS): loss of 8.7 cents, versus loss of 173.8 cents in FY13
Consensus dividend per share (DPS): nil, unchanged

Blackmores (BKL)

Consensus earnings per share (EPS): 146 cents, +5.4%
Consensus dividend per share (DPS): 127 cents, unchanged

Beach Energy (BPT)

Consensus earnings per share (EPS): 20.3 cents, +66.8%
Consensus dividend per share (DPS): 3.4 cents, +24.5%

Flight Centre (FLT)

Consensus earnings per share (EPS): 254.2 cents, +3.5%
Consensus dividend per share (DPS): 152.3 cents, +11.2%

GreenCross (GXL)

Consensus earnings per share (EPS): 26.7 cents, +42.7%
Consensus dividend per share (DPS): 13.5 cents, +35%

McMillan Shakespeare (MMS)

Consensus earnings per share (EPS): 71.3 cents, –14.5%
Consensus dividend per share (DPS): 44.5 cents, –9.2%

Mayne Pharma (MYX)

Consensus earnings per share (EPS): 3.1 cents, versus loss of 0.7 cents in FY13
Consensus dividend per share (DPS): nil, unchanged

Resolute Mining (RSG)

Consensus earnings per share (EPS): 4.7 cents, –64.6%
Consensus dividend per share (DPS): nil, versus 5 cents in FY13

Seven Group (SVW)

Consensus earnings per share (EPS): 82 cents, –45%
Consensus dividend per share (DPS): 40 cents, unchanged

Virtus Health (VRT)

Consensus earnings per share (EPS): 39.6 cents, versus prospectus forecast of 39.5 cents
Consensus dividend per share (DPS): 24.4 cents

Western Areas (WSA)

Consensus earnings per share (EPS): 11 cents, versus loss of 49.8 cents in FY13
Consensus dividend per share (DPS): 3.6 cents, +82.1%

WEDNESDAY

Abacus Property (ABP)

Consensus earnings per share (EPS): 19 cents, +2.9%
Consensus dividend per share (DPS): 17 cents, unchanged

Astro Japan Property Trust (AJA)

Consensus earnings per share (EPS): 42.8 cents, versus loss of 45.8 cents in FY13
Consensus dividend per share (DPS): 20 cents, +14.3%

BC Iron (BCI)

Consensus earnings per share (EPS): 65.3 cents, +23.8%
Consensus dividend per share (DPS): 30.3 cents, –13.3%

Boral (BLD)

Consensus earnings per share (EPS): 21 cents, versus loss of 27.7 cents in FY13
Consensus dividend per share (DPS): 14.4 cents, +30.7%

Charter Hall Group (CHC)

Consensus earnings per share (EPS): 25.3 cents, +36.3%
Consensus dividend per share (DPS): 22.2 cents, +10%

Energy Developments (ENE)

Consensus earnings per share (EPS): 30.6 cents, –7.5%
Consensus dividend per share (DPS): 22.5 cents, +104.4%

Lend Lease (LLC)

Consensus earnings per share (EPS): 125 cents, +25.3%
Consensus dividend per share (DPS): 61 cents, +45.3%

Prime Media (PRT)

Consensus earnings per share (EPS): 9.4 cents, +110.1%
Consensus dividend per share (DPS): 7.1 cents, –2.3%

Transfield Services (TSE)

Consensus earnings per share (EPS): 11.4 cents, versus loss of 48.7 cents in FY13
Consensus dividend per share (DPS): nil, versus 3 cents in FY13

WDS (WDS)

Consensus earnings per share (EPS): 8.8 cents, +54.4%
Consensus dividend per share (DPS): 7 cents, +21.7%

Whitehaven Coal (WHC)

Consensus earnings per share (EPS): loss of 4.1 cents, versus loss of 8.4 cents in FY13
Consensus dividend per share (DPS): nil, unchanged

Worley Parsons (WOR)

Consensus earnings per share (EPS): 109.6 cents, –16.2%
Consensus dividend per share (DPS): 79.6, –13.9%

Woolworths (WOW)

Consensus earnings per share (EPS): 194.9 cents, +6.7%
Consensus dividend per share (DPS): 137.2 cents, +3.1%

THURSDAY

Air New Zealand (AIZ), reports in $NZ

Consensus earnings per share (EPS): 21 cents, +26.5%
Consensus dividend per share (DPS): 11 cents, +37.5%

Ausdrill (ASL)

Consensus earnings per share (EPS): 1.6 cents, –94.5%
Consensus dividend per share (DPS): 4.5 cents, –62.5%

Carindale Property Trust (CDP)

Consensus earnings per share (EPS): 29 cents, –19.1%
Consensus dividend per share (DPS): 31 cents, +3.7%

Corporate Travel Management (CTD)

Consensus earnings per share (EPS): 21.7 cents, +24.4%
Consensus dividend per share (DPS): 12 cents, +14.3%

Drillsearch Energy (DLS)

Consensus earnings per share (EPS): 22.6 cents, +103.2%
Consensus dividend per share (DPS): nil, unchanged

Independence Group (IGO)

Consensus earnings per share (EPS): 27 cents, +244.5%
Consensus dividend per share (DPS): 7.2 cents, +257.6%

iSelect (ISU)

Consensus earnings per share (EPS): 7.3 cents
Consensus dividend per share (DPS): nil

Kingsgate Consolidated (KCN)

Consensus earnings per share (EPS): 0.5 cents, versus loss of 213.3 cents in FY13
Consensus dividend per share (DPS): 1 cent, –93.3%

Macquarie Atlas Roads (MQA)

Consensus earnings per share (EPS): 12.1 cents, –95.9%
Consensus dividend per share (DPS): 12.9 cents, +125.7%

Panoramic Resources (PAN)

Consensus earnings per share (EPS): 1 cent, versus loss of 12.7 cents in FY13
Consensus dividend per share (DPS): 1 cent, unchanged

Perpetual (PPT)

Consensus earnings per share (EPS): 243.9 cents, +54.2%
Consensus dividend per share (DPS): 173.4 cents, +33.4%

Qantas Airways (QAN)

Consensus earnings per share (EPS): loss of 24.1 cents, versus earnings of 0.2 cents in FY13
Consensus dividend per share (DPS): nil, unchanged

Reece Australia (REH)

Consensus earnings per share (EPS): 130.9 cents, +9.1%
Consensus dividend per share (DPS): 73 cents, +17.7%

Retail Food Group (RFG)

Consensus earnings per share (EPS): 26.2 cents, +0.8%
Consensus dividend per share (DPS): 21 cents, +6.3%

Ramsay Health Care (RHC)

Consensus earnings per share (EPS): 162.4 cents, +29.8%
Consensus dividend per share (DPS): 83.2 cents, +31%

FRIDAY

Austal (ASB)

Consensus earnings per share (EPS): 9.1 cents, –31.1%
Consensus dividend per share (DPS): 1 cent, versus nil in FY13

Evolution Mining (EVN)

Consensus earnings per share (EPS): 8.8 cents, versus loss of 43.4 cents in FY13
Consensus dividend per share (DPS): 1.4 cents, +40%

Harvey Norman (HVN)

Consensus earnings per share (EPS): 19 cents, +42.1%
Consensus dividend per share (DPS): 10.5 cents, +16.4%

Peet & Co (PPC)

Consensus earnings per share (EPS): 7.4 cents, +12,191.7%
Consensus dividend per share (DPS): 3.2 cents, versus nil in FY13

Steadfast Group (SDF)

Consensus earnings per share (EPS): 7.3 cents,
Consensus dividend per share (DPS): 4.7 cents

Virgin Australia (VAH)

Consensus earnings per share (EPS): loss of 5.1 cents, versus loss of 4.1 cents in FY13
Consensus dividend per share (DPS): nil, unchanged

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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