Bell Direct’s ASX reporting season review
In this blog, Bell Direct Market Analyst Grady Wulff discusses the results of some of the leading ASX stocks this reporting season, plus key themes and takeaways that investors should keep in mind. Keep reading to learn more.
In the high interest rate, high cost-of-living environment, consumer staples stocks generally remain defensive and have weathered the storm by passing on rising costs without impacting demand. In the case of some staples stocks, this reporting season we have seen investors impressed with both FY23 results and outlook for FY24, while some key names have underperformed the market and expect to face cost headwinds in FY24, which sparked investors to flee upon results being released.
Woolworths Group had investors eagerly awaiting the release of FY23 results on Wednesday 23 August after Coles Group (ASX:COL) disappointed a day earlier. Coles reported marginal growth in FY23, maintained a flat final dividend and reported cost headwinds are expected to be faced in FY24 through rising wages, growing theft in store and inflationary pressures. Investors sold out of Woolworths on the day before its results were released in anticipation that the supermarket giant would report similar dull outlook and pressures faced by Coles, however this wasn’t the case and investors piled back in the following session.
In FY23 Woolworths reported Group sales up 5.7% to $64.3bn, which cements the company’s leadership position in the Australian market after Coles Group posted Group Sales revenue of $41.47bn, representing growth of 5.3% on FY22, which fell short of Woolworths’ growth. Across the broader metrics, Woolworths excelled in FY23 including gross margin as a % of sales rising 26.8%, group EBIT up 15.8% to $3.116bn, NPAT up 4.6% to $1.618bn and the final dividend rose 9.4% to 58cps, while Coles held the final dividend flat at 30cps. In response to the strong FY23 results, investors sent the WOW share price up 5% intraday.
Another staples stock that had investors clucking was Ingham’s Group with shares in Australia’s leading poultry producer lifting 15% upon results being released. Throughout FY23 the company reported a moderation in fertiliser and feed prices which had been a headwind in previous financial years, as well as a return to longer-term growth outlook for FY24 being expected as volumes rise. From an operational standpoint, Ingham’s revenue rose 12% year-on-year to $3.044bn, underlying NPAT rose 68% year-on-year to $71.1m and net debt was reduced to $394.7m. The company is also allocating $100m to capex in FY24 toward automation options.
Lithium remains the word of 2023 but investors were not totally impressed with the FY23 results out of market darling and lithium giant Pilbara Minerals, as shares in the company fell over 6% upon release of the results. Despite reporting an explosive jump in most metrics throughout FY23, investors appear to have been wanting more. Pilbara Minerals reported that record production and sales were behind a 326% increase in net profit to $2.4bn. A 64% increase in spodumene concentrate saw 620.1 thousand tonnes (kt) produced, supported by a 68% rise in sales to 607.5kt. Strong demand for lithium increased the average realised price of spodumene concentrate to US$4,447 per tonne.
Production and price increases resulted in a 242% increase in Group revenue to $4.1bn and statutory net profit rose 326% to $2.4bn. The company also declared an increase in its final dividend to 14cps from zero cps in FY22. Another positive in the report was Pilbara issuing quantitative guidance for FY24 including the expectation of a production between 660-690k of spodumene concentrate, unit operating costs between $600-$670/dmt³. One area investors may be concerned with regarding the FY24 outlook is the growth in CAPEX, mine development, sustaining capital and projects and enhancement costs.
Healthcare stocks have been sold off in 2023 amid high valuations post COVID-19 and slowing earnings growth heading into the new financial year. Telix Pharmaceuticals bucked the trend though, soaring 4% on release of first half FY23 results including a nine-fold increase in group revenue to $220.8m, net loss reduction of 80% to $14.3m and gross margin of 64% from 56% in H1 FY22.
The company also posted a positive operating cash flow driven by commercial sales of its prostate cancer imaging agent, Illucix, and increased the cash balance at the end of the first half FY23 to $131.7m from $116.3m at December 31, 2022. Telix has been a headline name in the healthcare sector in 2023 following the first commercial sales of the company’s Illucix imaging agent, with further drugs set to hit the market over the new financial year, which opens a long growth and earnings runway for the company for years to come.
- China exposure is hurting the outlook of companies operating in this region
- Margin contraction is an area that investors punished due to lack of price increases on products/services as costs rise
- Failure to provide quantitative outlook is another area of concern for investors heading into the new financial year
- The retailers who reduced inventory levels, controlled promotional activity and remained resilient during the slowing consumer demand year of FY23 have prevailed in the eye of investors
- Healthcare valuations are declining amid slowing earnings growth outlook heading into FY24.
For more information on the latest market trends, see Bell Direct’s news and market insights.
This information is general in nature and does not take into account your financial situation, objectives or needs. You should consider whether it is appropriate for you. You should read our Financial Services Guide and any relevant Product Disclosure Statements before making an investment. For more information visit belldirect.com.au or call 1300 786 199. Bell Direct is the trading name of Third Party Platform Pty Ltd ABN 74 121 227 905, AFSL 314341.
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