Earnings Wrap: Appen shares hit 7-year low as losses widen, Fortescue CEO resigns

Fortescue (ASX: FMG): FY23 result overshadowed by CEO reshuffle

One liner: Result overshadowed by news of another reshuffle in its senior ranks, as CEO Fiona Hick announces her departure after just six months in the role.

The iron ore producer’s FY23 results delivered two beats but management slashed its final dividend for FY23 as EBITDA and NPAT fell from previous levels.

• Underlying NPAT US$5.52bn missed analyst’s expected figure of US$5.60bn and was down 11% on FY22

• Statutory NPAT was 25% down on FY22, “reflecting the decrease in underlying EBITDA and an US$726 million impairment charge relating to Iron Bridge,” management said.

• Revenue of US$16.87bn was ahead of consensus of US$16.79bn, but down 3% on last year’s figure as increased iron ore sales were more than offset by the 5% decrease in average revenue.

• Free cash of US$4.3bn and net debt of US$1bn as of 30 June 2023.

• Fully franked final dividend of $1.00 a share, increasing total dividends declared in FY23 to $1.75 a share, equating to $5.4 billion and a 65% payout of underlying NPAT.

The incoming CEO, Dino Otranto, spoke of “significant milestones during the FY including first production at our Iron Bridge magnetite project and first ore mined from the Belinga Iron Ore project in Gabon.”He also called out FMG’s record iron ore shipments in FY23, 2% up on FY22

Outlook

• Fortescue Metals capital expenditure for FY24 of US$2.8 - US$3.2 billion

• Fortescue Energy net operating expenditure of approximately US$800 million and capital expenditure and investments of approximately US$400 million (exclusive of projects subject to FID).

• Guidance is based on an assumed FY24 average exchange rate of AUD:USD 0.68

• Iron ore shipments of 192 - 197mt, including approximately 7mt for Iron Bridge (100 per cent basis)

InvoCare (ASX: IVC): A Transition Year

One liner: 1HFY23 shows growth in revenues across most segments but lower EBITDA; proposed takeover by TPG Capital Asia means no interim dividend to be paid per terms of Scheme Implementation Deed.

• Operating revenue of $287.4m, up 2%

• Operating EBITDA of $62.4m, down 9%

• NPAT $4.5m versus HY22 $41.1m; impact of AASB1017 on pre-paid contracts

InvoCare’s CEO, Mr Olivier Chretien said, “2023 was always going to be a transition year for the Group with mortality rates stabilising in our key markets following last year’s unprecedented and volatile demand, our cost of doing business continuing to be impacted by inflation, and the ending of the earnings benefit from the AASB 15 transition unwind.”

Outlook

• Mortality rates expected to revert to long term trends (after three years of volatility)

• The impact of the 2023 flu season remains comparatively benign Q3 to date

• Impact seen in funeral case volumes and burial/cremation volumes in our parks, compared to pcp

• Case averages remain strong compared to pcp, notwithstanding economic headwinds

• Continued focus on operational excellence, cost and margin management given market condition

• InvoCare’s CEO, Oliver Chretien: “In the near term, the team remains focused on continuing to serve our client families to the highest standard and executing our strategies. At the same time, we will work towards completing the scheme of arrangement with TPG, which is anticipated to complete in the last quarter of the year.”

Appen (ASX: APX): A Worse-than-feared 1H23

One liner: Steeper than expected losses and revenue in the first half of FY23 reflecting a lower contribution from the company's global services division.

• Group revenue of $138.9m, down 24%

• EBITDA loss of $15.7 million vs. the $9.6m loss a year ago and above analyst expectations of a $12m loss

• Underlying net loss after tax of $34.2m compared to a $3.8m loss a year ago

Management comments

• "In response to the broader technology slowdown, we are focusing on areas we can control and have already achieved 63% of our $46 million cost reduction target."

• "We remain focused on exiting FY23 as an underlying EBITDA and cash EBITDA positive business."

• "It is an exciting time for AI, and Appen continues to play an important role in the industry. Our data and services power the world’s leading AI models."

Outlook

• Expects 2H23 revenue to be closer to 1H23 revenue

• Focus on exciting FY23 with underlying EBITDA profitability on an annualised run-rate basis

Codan (ASX: CDA): No Surprises

One liner: No surprises after the company pre-reported second half results on 15 August. FY23 revenue and NPAT down, as communications achieve strong performance, geopolitical factors in Northeast African market.

• Revenue $456.5m down 10% on FY22

• Underlying NPAT $65.5m down 35% on pcp

• Final dividend per share 9.5c, for annual fully franked dividend 18.5c

Chief Executive Officer, Alf Ianniello, “In the face of uncertain regional geopolitical and challenging global macroeconomic factors, Codan has delivered a stronger second half result. Minelab delivered stronger second half performance with newly released recreational detectors delivering exceptional results, driving FY23 Rest of World revenue growth and Communications achieved 14% revenue growth year on year.”

FY24 Outlook:

• Communications business (excluding Eagle) is targeting to deliver revenue growth of +10-15%

• Minelab's Rest of World recreational market is targeting to continue high single digit growth

• Regional geopolitical issues persist and global macroeconomic conditions remain uncertain