Earnings Wrap: Beach Energy and Aurizon's profit drop, Lendlease losses widen

Beach Energy: Production drop feeds into lower profits

Beach Energy’s (ASX: BPT) FY23 net profits fell 24% to $385 million as weaker production offset a 9% increase in realised gas prices. The result was largely in-line with analyst expectations, including:

• Revenue of $1.62bn vs. $1.64bn expected

• Underlying net profit of $385m vs. $383m expected

• Operating cash flow of $929m vs. $789m expected

The final dividend doubled year-on-year to 2 cents per share with a record date of 5 September.

“Implementation of our new Capital Management Framework delivered franked dividends of four cents per share, a 100% increase from the prior year. The framework provides a transparent pathway for increased shareholder returns as we deliver our growth projects,” said Interim CEO Bruce Clement. 

FY24 Outlook

• Capital expenditures of $850m to $1.0bn (vs. analyst expectations of $834m

• Growth expenditure accounts for 35-45% of total Capex

• Production of 18.0 to 21.0 MMboe vs. 19.5 MMboe in FY23

Lendlease: Losses widen reflecting tough trading conditions

Lendlease (ASX: LLC) reported an FY23 statutory net loss of $232m due to “retrospective legislation in the UK, difficult trading conditions, provisions against prior projects and receivables, and lower property valuations.”

The overall result was relatively mixed, notably:

• Operating EBITDA down 13.5% to $544m vs. $615m expected

• Core operating profit after tax down 7% to $257m vs. $248m expected

• Funds under management up 9% to $48.3bn

• Backlog revenue of $8.7bn

• Maintained full-year distribution of 16.0 cents per share

The EBITDA miss reflected the “recycling of mature assets, higher interest costs impacting distributions, margin compression on funds management and the Americas Telecommunications provision.” 

FY24 outlook

• On track to meet the lower end of Return on Equity Target of 8-10% in FY24

• Development earnings are expected to further recover, with target completions more than doubling in FY24 to greater than $8b

• In Construction, we expect margins to improve, and anticipate realisation of backlog revenue in line with historical levels and additional new work secured

Aurizon: 30% profit decline caps a tough FY23

Heavy rail operator Aurizon (ASX: AZJ) reported $367 million in net profits after tax for FY2023, down 30% on the same period 12 months earlier.

Underlying earnings before interest, tax, depreciation and amortisation of $1.42 billion was also down 3% year-on-year.

Management attributed the results to:

• Earnings from coal falling 16% during the period, on the back of lower volumes due to prolonged wet weather, mine-specific issues, and a major derailment of a coal haulage train in January.

• Bulk haulage EBITDA increasing 49% to $214 million, with volumes up 34% on FY2022, including stronger grain volumes nationally.

Aurizon managing director and CEO Andrew Harding described FY2023 as a “challenging operating environment” but emphasised he’s confident of an improved outlook in FY2024.The company announced a final dividend of 8 cents a share, 60% franked.

Outlook

• “We saw an uptick in Coal (2%) and Network (9%) volumes in the June quarter, which gives us confidence in an improved outlook for FY2024.,” Harding said.

• The group’s Network division includes two major pieces of rail infrastructure: the 2670km Central Queensland Coal Network and the Tarcoola to Darwin railway, which stretches 2100km from South Australia to the nation’s northern tip.

In FY2024, Aurizon expects Group EBITDA to be in the range of $1.6 billion and $1.68 billion. Management also anticipates sustaining capital expenditure of between $600 million and $660 million growth capital expenditure in the range of $250 million and $300 million.

Bendigo Bank: New cash earnings record, profits hold steady

Bendigo & Adelaide Bank (ASX: BEN) reported $576.9 million in cash earnings after tax for FY23, a 15% year-on-year increase and a new record for the group.

Statutory net profit after tax of $497 million was up 1.8% on FY2022 and net interest margin of 1.94% climbed 20 basis points.

BEN’s CEO and managing director Marnie Baker said the result showed the bank’s focus on “returns and execution” was paying off, pointing to its competitiveness in key lending markets and the return of lending growth over the last quarter.

“Our transformation strategy is on track with key milestones reached as we execute on our strategic imperatives of reducing complexity in our business and investing in capabilities to meet the growing and changing expectations of our customers and other stakeholders,” Baker said.

As part of this, customer numbers increased by 9.9% to 2.4 million during FY23.The board declared a final dividend of 32 cents a share, taking the fully-franked full year dividend to 61 cents, at the lower end of the dividend payout ratio target range of between 60% and 80% of cash earnings.

Outlook

• Baker noted the difficult economic environment and associated cost of living pressures were likely to continue through FY24, but anticipates improvement to begin in FY2025.

• “While our asset quality remains sound and arrears are at historic lows, we do expect bad debts to trend upwards and move towards longer term averages of 10 to 12 basis points over time,” she said.

• Baker said 41% of loans on the bank’s books are at least one year ahead on repayments and 31% are two years ahead, with 84% of its home loans maintaining a financial buffer.

Ansell: Profits down 6.6% on post-COVID demand slump

The medical and industrial gloves manufacturer saw sales and earnings before interest and tax dip by 15% each in FY23, driven largely by the post-COVID demand slowdown.

As flagged in mid-July, management today reported sales of US$1.65 billion in FY23, down from US$1.95 billion a year earlier, and EBIT of $US206.3 billion, down from US$245 billion.

Declining orders for gloves and surgical suits, which hit record highs during the COVID pandemic, led the group’s healthcare division to a 24% decline in sales.

Ansell’s managing director and CEO Neil Salmon acknowledged the “unique range of challenges as we continued to experience the lingering effets of pandemic-related changes to customer behaviour.”

“Despite these challenges, we were able to deliver FY23 EPS within the original guidance range we provided to the market alongside our FY22 results release in August 2022,” Salmon said.

Management declared a final unfranked dividend of 25.8 US cents a share, to be paid on 7 September. This takes the full-year figure to 45.90 US cents, representing a 40% payout ratio in line with Ansell’s dividend policy