Reporting Season

Earnings Wrap: Downturn bites Harvey Norman dividend; IGO stock gains on solid FY23 result

Thu 31 Aug 23, 9:59am (AEDT)

Harvey Norman (ASX: HVN)

One liner: Electronics and consumer goods retailer delivered a triple-beat to analyst expectations in FY23, despite sharp declines in year-on-year NPAT and revenue amid the weaker economic climate.

  • Underlying NPAT $471.9M versus analyst expectations of $469.7M

  • Consolidated revenue $4.28B versus consensus $4.05B

  • EBITDA $1.13B vs consensus $1.01B

  • System sales $9.19B vs year-ago $9.56B

  • Pre-tax income $680.2M versus year ago $680.3M

  • Final dividend of 12 cents a year, down from 17.5 cents

Chairman Gerry Harvey emphasised the positives in the result, including a 40% growth in net assets, balance sheet strength, and healthy debt-to-equity ratio.

“Our prudent financial management has resulted in ample liquidity and a low net debt to equity ratio of 13.85%, providing us with the capacity to access additional liquidity as required.”

He said the overall group of Harvey Norman, Domayne and Joyce Mayne brands are “well-placed to benefit from any upturn in trading conditions and any growth that may arise from the home renovation cycle, new home starts, and net migration increases.”

No specific guidance for FY24 was provided.


Sandfire Resources (ASX: SFR)

One liner: The copper miner booked US$53m NPAT loss for FY23 but its share price gained 2% in early trade on a boosted production outlook. Writedowns underpinned the loss, the result also ahead of consensus on revenue and underlying EBITDA.

  • Underlying earnings -$45.3M vs consensus -$59.6M

  • Sales revenue $804.0M vs FactSet $784.8M

  • Underlying EBITDA $258.5M vs FactSet $248.5M

The statutory loss of $53.7M included discretionary exploration expenditure of US$36.1M and a $254.6M depreciation expense at MATSA, as the US$1.865B acquisition continued to be amortised primarily on the basis of known reserves. Sandfire’s CEO and Managing Director, Mr Brendan Harris, described: “another transformative year as we made great progress toward achieving our goal of becoming a sustainable mining company and global copper producer of significance.”

Outlook

  • Rapid and low-cost expansion of Motheo’s processing capacity to 5.2Mtpa is on track for completion by the end H1 FY24

  • Group copper equivalent production is expected to increase by 10%7 in FY24 with the ramp-up of Motheo to be partially offset by the loss of production from DeGrussa.

  • Investment in exploration and evaluation is expected to decline by approximately US$12.4M in FY2024 to US$32.5M.

  • Group capital expenditure of approximately $255M is expected in FY24.

Atlas Arteria (ASX: ALX)

One liner: Atlas Arteria reported H1FY23 Proportionate EBITDA $669.7M slightly ahead of consensus $668.3M; increased traffic and higher inflationary environment supporting toll increases and earnings.

  • Proportionate Revenue from interest in APRR Group of $828.9M lower than consensus expectations of $880.6M

  • Statutory NPAT $136.5M, +17% vs year-ago $117.1M

  • NTA per stapled security of $2.99 as of 30 June 2023 vs year-ago $1.27

CEO Graeme Bevans said, ‘We continued to benefit from the high inflationary environment, which is supporting toll increases and earnings, while the high proportion of fixed-rate debt across our businesses is providing protection against rising interest rates.’

Outlook

CEO Graeme Bevans: "Looking forward we have very clear strategic priorities, and our financial position is strong."

  • H1 DPS of $0.20, funded by operating cash flow and cash on balance sheet, not contingent on Chicago Skyway refinancing

  • H2FY23 DPS $0.20

  • New Director Ms Kiernan Bell to join the Board from 1 September 2023, replacing Caroline Foulger who resigned on 1 July.


Costa Group (ASX: CGC)

One liner: Costa Group Holdings reports 1HFY23 underlying NPAT-S $37.8M missing consensus expectations of $46.9M

Note: “NPAT-S” refers to net profit after tax and self-generating and regenerating assets (SGARA) fair valuations of biological assets.

  • Revenue $770.7M ahead of consensus $737.8M

  • EBITDA-S $150.2M, in line with preliminary

  • EBIT $66.4M lower than consensus of $87.2M

  • Transacted sales A$1.01B vs year-ago A$946.3M

  • No interim dividend.

Update on Payne Schwartz Partners non-binding indicative proposal

  • Discussions with PSP continuing

  • remains unclear if the transaction will eventuate and at what price

  • shareholders do not need to take action at this time

  • CGC Board expects to update shareholders in mid-September.

Current Trading and Outlook:

  • Deterioration in late season 2PH fruit quality and southern region volume and fruit size downgrades are currently estimated to have a circa $30M impact on full-year EBITDA-S

  • The contributing factors are considered non-structural with the ongoing health and productive capacity of the trees unaffected

  • There has been stable weather and positive pricing over the early part of the main (northern NSW) Berry season, together with an expected solid Arana crop, pointing to strong H2 berry earnings versus the prior corresponding period

  • Mushroom demand steadily improved consistent with cooler winter months, with demand over the coming period expected to level off

  • Monarto facility production remains ahead of capacity, while Mernda facility volumes continue to improve, aided by more stable compost supply

  • The softening in tomato demand is expected to continue through H2, impacted by higher industry-wide volumes, including from field crops

  • Insourcing of Pacific Seasonal labour continues, which is contributing to ongoing improved security of labour supply.


IGO Group (ASX: IGO)

One liner: Strong FY23 result from the nickel-copper-cobalt-lithium miner, including special dividend, saw IGO's share price jump 5% in early trade, despite $1bn provision

  • IGO this morning posted a forecast that beat profits of $1.53B, ahead of expectations of $1.52B.

  • Revenues missed analyst expectations of $1.02B vs $1.08B expected.

  • EBITDA came in at $1.99B, just ahead of consensus of $1.98B.

  • Final dividend of 44cps, and a special dividend of 16cps.

Despite the pristine results, a near $1 billion provision relating to IGO’s Forrestania and Cosmos assets took some of the shine off. The provision was flagged a month ago and has prompted an independent review of the Cosmo nickel project.

Higher operating costs and delays have plagued that project, which was part of the assets acquired rom Western Areas in June 2022.

More to come

Written By

Glenn Freeman

Content Editor

Glenn is a Content Editor at Livewire Markets and Market Index. Glenn has almost 20 years’ experience in financial services writing and editing. Glenn’s journalistic experience also spans energy and automotive, in both Australia and abroad – including the Middle East – where he edited an oil and gas publication in the United Arab Emirates.

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