Earnings Wrap: Iress shares nosedive 30%, Adairs withdraws guidance, Breville beats estimates

A2 Milk: Earnings miss, Uncertainty ahead

A2 Milk (ASX: A2M) reported FY attributable NPAT NZ$155.6 million lower than consensus expectations of NZ$149 million.

• Revenue was up 10.1% to NZ$1.59 billion, in line with consensus expectations

  • Driven by strong growth in the China & Other Asia segment up 37.9%, with the USA and MVM segments also up 27.1% and 9.2% respectively, the outcomes was partially offset by a 30.2% decrease in the ANZ segment mainly due to an intentional change in English label distribution strategy.

• EBITDA NZ$219.3 million increased by 11.8% pcp and in line with consensus expectations, primarily reflected higher revenue and gross margin improvements.

CEO David Bortolussi said, “We have re-invested more in our brand again this year driving further gains in China brand health metrics and supporting future sales growth. The China IMF market has become increasingly challenging as a result of lower birth rates and increased competitive intensity. Notwithstanding, we are well positioned to continue to invest and grow share in FY24 to emerge in a stronger position when the market recovers.”

FY outlook (Jun 2024):

• Management notes a broad range of sales outcomes is possible due to market conditions

• Expecting low single-digit revenue growth in FY24

• Gross margin % expected to be similar to FY23 y/y

• EBITDA margin to be broadly flat y/y

• SG&A expenses to be flat y/y

• Planning to increase brand investment to support new China label product launch and growth

• Capex ~NZ$26M

IRESS: Shares dumped on weak outlook

Iress (ASX: IRE) says its transformation plan remains on track for completion in 2024, focused on improving core businesses' performance and enhancing customer experience. The company's first-half FY23 results were relatively soft alongside a muted second-half outlook.

• Revenue rose 2% to $315.3 million, in-line with consensus expectations

• Adjsuted EBITDA of $59.5 million missed the $64.5 million expected by analysts

• Underlying net profit of $24.4m missed the $24.8 million expected

• Suspended dividend amid period of high one-off costs

Outlook

• Iress expects softening revenue growth in 2H 2023, mitigated by full-year effects of cost measures and transformation initiatives

• Underlying EBITDA expectations for 2H23 are broadly flat compared to 1H23

• Full-year guidance for 2023 has been adjusted downward due to cost challenges, reduced market trading volumes, and broader macro uncertainties in the second half

• Medium-term outlook includes FY24 Underlying EBITDA growth of 5-10% and a 20-30% higher exit run-rate 2024 Underlying EBITDA compared to FY23

IAG reports earnings, gross written premiums fall in FY2023

Insurance Australia Group’s (ASX: IAG) cash earnings of $452 million in FY23,  missed consensus forecasts of $517.3 million.

Australia’s largest general insurer reported gross written premiums of $14.73 billion and net earned premiums of $8.33 billion for the period, in line with the $14.67 billion and $8.43 billion expected by analysts.

Management emphasised that elevated inflation in home and motor claims costs, as well as the higher natural perils allowance, impacted the group’s underlying insurance margin, which narrowed to 12.6%, versus 14.6% in FY22.

IAG’s net profit after tax increased to $832 million, from $347 million in FY22, benefiting from a post-tax business interruption provision release of $392 million.

“It came in a year where we paid around $10.2 billion in claims … up approximately 20% on FY22,” said IAG managing director and CEO Nick Hawkins.

The board declared a final dividend of 9 cents a share.

nib: Record sales but cautious on outlook

nib (ASX: NHF) says its flagship arhi business achieved its highest sales and strongest net policyholder growth in more than eight years amid a sharp recovery in inbound international students and travel demand.

• Group revenue up 10.9% to $3.1 billion

• Underlying net profit up 42.8% to $191.1 million, in-line with the $191.8 million expected by analysts

• Underlying operating profit up 11.1% to $263.2 million, above the $252.6 million expected by analysts

• Full-year dividend of 28 cents per share, in-line with market expectations

Outlook

• The outlook across the Group remains positive despite some macroeconomic caution

• Growth is supported by increased health awareness, pressure on public healthcare delivery, population growth from immigration, and a resurgence in travel

• Management expects nib's private health insurance business in Australia and New Zealand to continue growing, while acknowledging potential uncertainties in claims expense due to evolving healthcare demand

Reliance Worldwide: Shares set to tumble on soft outlook

Reliance Worldwide (ASX: RWC) reported a resilient FY23 result amid challenging economic conditions, lower volumes and higher costs.

• Net sales rose 6% to US$1.24 billion, in-line with analyst expectations

• Adjsuted EBITDA up 2% to US$274.6 million vs. $272.3 million expected

• Adjusted net profit fell 4% to $155.7 million, well-above the $143.8 million expected by analysts

• Cash flow from operations up 110% to US$292.7 million

• Full-year dividend of 9.5 US cents per share

Outlook

• Revenue growth to be down by low single digit percentage points due to lower sales in most markets while analysts were expecting growth of around 1.0%

• “In FY24, we expect our core repair and remodel business to remain solid, but total demand to be lower due to a downturn in sentiment impacting larger remodel projects," said CEO Heath Sharp

• Expects operating cash flow conversion to return to normal levels of around 90% for the year

Breville Group: Double beat, cash flow expected to improve

Breville (ASX: BRG) reported results that topped analyst expectations across the board and expects FY24 cash flows to improve as supply chain disruptions ease.

• Revenue up 4% to $1.4b billion in FY23, in-line with the $1.48 billion expected

• EBIT rose 10.0% to $172.0 million, above the $169.0 million expected

• Net profit rose 4.2% to $110.2 million, above the $107 million expected

Breville Group CEO Jim Clayton said the result underpinned “a solid year of performance for the group…against a challenging and dynamic backdrop with a subdued consumer, inflationary headwinds, a strong denominator, and retailer destocking.”

He emphasised the continuing growth in the business’s global footprint, highlighting the acceleration of its Europe, Middle East and African operations to “to pick up the slack in the Americas as Bed Bath and Beyond slowly exited the market.”

The board declared a final dividend of 15.5 cents a share, fully-franked.

Outlook

• Cash inflow expected in FY24, as demand and supply chain predictability returns

• Expense budget set with flexibility to deliver EBIT growth under a range of probable revenue scenarios.

Adairs: Withdraws guidance, shares tumble

Adairs (ASX: ADH) nderlying EBIT of $63.9 million, missing consensus expectations of $65.9 million.

Underlying NPAT came in at $40.2 million, ahead of expectations of $39.5 million, on revenues of $621.3 million.

Outlook:

• Near-term outlook is likely to remain challenging given prevailing macro-economic headwinds

• Given the uncertainty in outlook the board does not consider it appropriate to provide guidance for FY24 at this time.

Ampol books mixed first-half 2023 result

Ampol (ASX: ALD) has reported first-half 2023 RCOP net profit after tax of $329.6 million (replacement cost operating profit is adjusted to exclude significant items) down 26% from 444.7 million, below market expectations of $307 million.

• Revenue of $18.45 billion was slightly above consensus of $17.39 billion.

• Total sales volumes increased by 25% from first half in 2022 to 14.4 billion litres.

• An interim dividend of 95 cents a share, fully-franked, was declared by the board, reflecting the group’s 69% payout ratio.

Charter Hall: Profit and earnings fall as property valuations decline

The property developer and funds management firm reported operating earnings of $441.2 million for FY23, missing consensus of $432.8 million.

• Adjusted EBITDA of $596.8 million was slightly ahead of consensus

• Statutory NPAT of $196.1 million was down from $911.1 million in FY22, on the back of divestments and valuation declines across the property investment portfolio.

• The group’s funds management division saw FUM grow by $7.5 billion to $87.4 billion. This figure comprised $71.9 billion of property FUM and a 50% investment in the $15.6 billion of FUM managed by Paradice Investment Management.

• Property FUM grew by $6.2 billion, or 9.5%, driven by $4.8 billion of net acquisitions, devaluations of $1.6 billion and capex spend predominantly on developments of $3 billion.

• The board declared a final distribution of 42.5 cents per security.

Outlook “Based on no material change in current market conditions, FY24 earnings guidance is for post-tax operating earnings per security of approximately 75 cents per security. FY24 distribution per security guidance is for 6% growth over FY23.”