Fast Five: ASX Reporting Season (JBH, BHP, CSL, EVN, AGL)

Disclaimer: Market cap as of 11 August 2022

In FY22, JB Hi-Fi’s sales grew 3.5% year-on-year (YoY) to a record $9.2b. Online sales were the standout, increasing 53% YoY to $1.6b as the company’s online strategy continues to pay dividends. Among their three divisions – Aus, NZ and Good Guys (acquired in November 2016) – Australia led JB Hi-Fi to a solid FY22, with a gross margin that increased 15bps to 22.4%. Both NZ and the Good Guys’ gross margins declined in FY22, ending the period at 17.4% and 23.3%, respectively. While those two divisions continued to have some problems, Australia allowed management to increase the annual dividend by 10.1% to $3.16 per share.

The new financial year has started well for the company, with July 2022 seeing sales growth of 9.7% and 7.8% YoY for the Australia and Good Guys divisions, respectively. NZ sales declined 0.9% YoY, but since that division only accounts for approximately 5% of JB Hi-Fi’s total sales, the impact of that drop isn’t a concern.

Disclaimer: Market cap as of 18 August 2022

Analysts’ expectations were undermined when the BHP Group reported its FY22 results on 16 August 2022. Unlike its rival Rio Tinto, which cut the cash returned to shareholders by half and didn’t issue a special dividend, BHP announced a US$1.75 final dividend which included a US$0.60 payout. While BHP’s shareholder payout ratio declined to 77% in FY22 (15bps YoY decline), the US$3.25 in total FY22 dividends per share was US$0.13 above analysts’ consensus estimates, according to Stockhead. How did analysts get BHP’s payout so wrong? Payouts come down to profits, and BHP’s FY22 net profits of US$30.9b were a full 36% above analysts’ consensus, due to underestimating the continued strength of its coal and iron ore operations.

Still, FY22’s results came with a few red flags for FY23. CEO Mike Henry said, ‘we expect to see a slowdown in advanced economies as monetary policy tightens, as well as ongoing geopolitical uncertainty and inflationary pressures. The direct and indirect impacts of Europe’s energy crisis are a particular point of concern.’ Combined with costs starting to rise, concerns about FY23’s results put a damper on BHP’s FY22 results party.

Disclaimer: Market cap as of 18 August 2022

Australia’s dreadful flu season this winter hasn’t done much to boost CSL’s results, which failed to impress the market. Net profit declined 6% YoY to US$2.3b, primarily due to a drop in plasma donations. Since immunoglobulin products form a significant part of CSL’s business, the lack of donations made it challenging to sell as much as the company intended. The market knew what to expect even before FY22’s results were released on 17 August 2022, and the fall in net profit was at the top of management guidance.

The lower number of plasma donations is not expected to be a transitory issue, and there’s no straightforward fix until COVID-19 abides. Combine this with a challenging costs environment across all other aspects of the business, and you get a bumpy road ahead for CSL. At least they’ve acknowledged it – the first and most important step to fixing any problem.

Disclaimer: Market cap as of 18 August 2022

When Evolution Mining released its results on 18 August 2022, the market responded with a 4% drop in the stock’s price. The main concern? Underlying net profit plummeted 22% YoY to $275m, due to a 4.9% increase in operating costs. Copper prices have also taken a hit recently, which impacted all copper and gold miners, but increased volumes from Evolution Mining’s existing mines partially offset this for them.

FY22 was not all doom and gloom. The company executed a few strategic acquisitions and made significant progress with the Red Lake and Cowal Underground projects. Evolution Mining believes it will be able to increase total production by an impressive 12.5% in FY23, and 11% in FY24. A bit of a mixed bag, but bright prospects for the future.

Disclaimer: Market cap as of 18 August 2022

AGL Energy released its FY22 results at 11am on 19 August 2022; by 12pm the stock had dropped approximately 2.5%. The numbers revealed a 58% YoY crash in underlying net profit and a 27% decline in underlying EBITDA, off the back of flat customer growth and volatile energy prices. If 2.5% doesn’t seem like much of a drop an hour later, it’s because the market was already prepared.

Due to expectations for the energy market to remain volatile, in its FY23 outlook management has announced that AGL is mostly hedged in the options market. Why is this important? It allows them to predict the company’s costs and act in advance accordingly. However, with more detailed guidance to be released in late September, AGL’s next 12 months look uncertain.

This is not a recommendation to invest, as always do your own research