Like Promina and Suncorp-Metway OneSteel’s latest results are interesting in a historical sense but it’s the immediate future that holds the key to the company’s progress and profitability because of the dramatic changes that about to happen.Read More
A couple of weeks ago we pointed out that with Qantas heading down the runway towards takeover, Virgin Blue would attract more interest from investors wanting some exposure to airline stocks and a proxy on oil prices.Read More
Suncorp-Metway’s outlook isn’t about banking and insurance, it’s really about the Promina merger, should it be approved.Read More
Boom child care operator, ABC Learning Centres hit a small pothole yesterday in its endless quest to grow.Read More
Once again the market’s unhappiness with a company delivering news outside expectations has been shown with the poor reception given to the interim results from equipment hire giant, Coates Hire.Read More
Another stock to surprise on the downside was fast food darling, Domino’s Pizza Enterprises, promoters of the pan pizza based eating experience in Australia and in several major markets overseas.
The company yesterday revealed a first half that showed the pan pizza eating experience isn’t luring as many Australians to Dominos as before, but is still proving seductive to pizza eaters in parts of Europe.
As a result the shares shed 12 per cent in value, or around 40c to $3.25, after it reported a 46.2 per cent fall in first half profit.
That’s a big ouch and the confident story about overseas expansion wasn’t enough offset the fact that like Coates, DOM needs to do well in its home base to earn solid profits.
The company did warn in October after the first quarter, that earnings would down by at least “$1.2 million” because of the problems in Australia but they have continued, given the downturn for the full six months.
Those problems involved promotion and the high crust pizza product which seems to have done poorly.
For a company like Domino’s growth can come from converting sales gains in foreign markets into earnings a little down the track but the simple fact is that to maintain its rating among investors, it needs to sell more pizzas in Australia.
And it didn’t do that well enough in the first half of 2007, thanks in part to the high proportion of company-owned stores in Australia as against franchised outlets which generate fees and other income streams..
The company said net profit was $3.5 million for the half year ended December 31, down from $6.5 million in the corresponding period.
Not even an expected second recovery in after tax earnings (a forecast of a 40 per cent rise on the first half) could offset the market’s suspicion.
CEO Don Meij said the result reflected the impact of its expansion into Europe and poor performance in Australia in the first quarter.
He said while Australian same store sales growth had been weak, European same store sales growth was 12.5 per cent, the New Zealand was also solid (compared to Australia).
European operations are “tracking better than planned” and are expected to make its first profit contribution in 2007/08.
But the company said the EBITDA (earnings before interest, tax, depreciation and amortisation) in Australia was off almost 17 per cent because of weaker promotions and start-up costs associated with the new in-house equipment maintenance and supply department.
Mr Meij said the company would begin reducing the proportion of corporate stores over the next 12 months from 30 per cent to around 15-20 per cent.
“This move will refocus our corporate stores into cost-effective geographic locations and reduce administration overheads, while still maintaining the benefits of the hybrid corporate-franchise store model,” he said.
Sounds like franchise speak for ‘we’ll be cutting the influence of earnings from our own stores and get income streams from selling the surplus locations to outsiders’.
That’s a switch in approach from the previous approach of maintaining company owned outlets above what is considered normal in some areas of franchising.
The company’s revenue rose 36.4 per cent to $118.1 million in the first half while network sales increased by 42 per cent to $251 million.
Domino’s is the master franchiser for the Dominos Pizza brand in Australia, New Zealand, France, Belgium and the Netherlands and it and its franchisees operate 645 stores: 457 stores of those are in Australia and New Zealand, so when Australia is offsong, the company is offsong as well.
Domino’s declared a first half dividend of 4.1 cents.
Like jobs group, Seek, Wotif.com is showing just how profitable the internet business model can be for a company flogging what is essentially a service:in this case accommodation.Read More
US bond rates fell to 4.69 per cent for the 10 year security last week, the lowest for several months and perhaps a sign the hard heads in the market see the risks of an economic slow down are greater than investors in stocks and commodities.Read More
The head of Strategy at the AMP, Dr Shane Oliver has warned that the local stockmarket “is in danger of a short term correction” after giving the 6000 point mark a nudge last week.Read More
With oil prices back over $US59 a barrel, our market will get a touch of hope today but there was nothing much in the way of assistance from other commodities.Read More
Repco Corp’s return to private ownership is on track, despite the troubled auto products retailing reporting a 67 per cent fall in first half profit and warning of a ‘challenging’ second half.Read More
Competition is often not understood or even practised in Australian business these days but in one industry its rife: lending money, especially home loans.Read More
Five bucks here we come? Any advance on five bucks?Read More
Like Telstra, Coca Cola Amatil’s current share price is all about what is to happen and how the future will pan out, rather than the recent past, especially the 2006 earnings which were released yesterday.Read More
There was nothing really outstanding in the interim profit announcement yesterday from Wesfarmers.Read More
Shares in small retailer, The Reject Shop (TRS) hit a record yesterday on the back of another solid result and expectations of more to come.Read More
After Woolies, David Jones is the ‘glamour’ retailer these days, thanks to things like its glitzy Sydney winter fashion launch on Tuesday night and the quality of its sales and earnings in the past year.Read More
If you had to use a short phrase or two to describe Leighton Holdings, it would be ubiquitous and highly profitable and becoming more so with news yesterday that 2007 earnings could hit a net $300 million.Read More
The market ended up not liking the interim result from the Commonwealth Bank of Australia, despite an initial positive response.Read More
We saw in the Fairfax Media result on Monday, a hint of the enormous growth in revenue for online advertising.Read More
Count Financial probably escaped a beating yesterday at the hands of investors when it missed its confident forecast of a 25 per cent lift in 2007 earnings.Read More
Cochlear, the artificial hearing implant group, provided investors with some joy yesterday.Read More
Discount electronics retailer JB Hi-Fi beat its 2006 full year earnings in half the time this year.Read More
Yes the Reserve Bank remains concerned about inflation, and no, interest rates are not going to rise again this year, so long as wages don’t rise and ‘things don’t get out of hand’, to paraphrase the central message from the central bank’s first Monetary Police Statement of the year.Read More
Like Qantas, Fairfax Media is one of those companies where it would befair to ask just where the share price would be now if it hadn’t been for the takeover deal with Rural Press and the share raid by News Corp last year.Read More
A predictably unanimous recommendation from the independent directors of Qantas to shareholders accept the $5.60 (actually $5.45) a share offer from Airline Partners Australia.Read More
Virgin Blue will soon be the largest of our listed airlines: that’s when Qantas leaves with the Australian Airline Partners takeover almost certain to go ahead, Government and politicians willing.Read More
Suddenly, the US housing downturn has gone from being a question of housing starts, permits and sales and the narrow impact on suppliers and operators, to having a widening impact on the US financial system.Read More
It was probably one of the silliest ideas promoted by a politician in recent years: a proposal to put a levy of two per cent onto all fixed rate home mortgages in New Zealand.Read More
Housing has traditionally been the source of much of Australia’s booms and busts but for the past three years it’s been side-lined by the resources boom.Read More
Another six month high for gold in New York as oil prices hit $US60 a barrel and worries continued to mount about the health of some parts of the US mortgage industry and some of the participants.Read More
Engineering company, WorleyParsons, has become the second Australian company to make a major sortie into the huge Canadian oil (tar) sands industry this week.Read More
Is Telstra getting a bit too pushy and arrogant?Read More
Lion Nathan disappointed the market yesterday when it didn’t reactivate its suspended share buyback plan.Read More
Rain is having a beneficial impact on the outlook for Futuris Corp, the rural services group which yesterday reported a six per cent rise in interim net profit to $33.1 million from $31.1 million.Read More
The market reaction said it all.Read More
Here’s BHP Billiton’s view of the world,over the past half year and looking ahead. It is surprisingly optimistic, especially about the declining influence of the US economy, the sustainability of the China boom and the strength of commodity prices for at the ‘medium term’ as they put (the next three years).Read More
The market shrugged off the latest gloomy news and outlook for building products group, Boral which produced a 14.6 per cent decline in interim earnings yesterday and forecast more of the same in the second half.Read More
‘Satisfactory’ I suppose is the way the interim result from Hills Industries should be best described.
It’s what the company said about the result and the outlook for the rest of the 2007 year.
Hills is a more complex beast these days: it’s no longer the maker of the iconic Hills Hoist: That’s still there but no longer the reason for its being.
After tax earnings up 12 per cent, a little faster than the 7.9 per cent rise at the pre-tax level and expectations of “satisfactory results for the full year.”
First half net came to $23.94 million, compared with $21.37 million for the previous interim period of 2006. This was after the rise in pre tax to $36.68 million from $34 million.
The latest result was struck on an 8.2 per cent rise in revenues to $511 million from $472 million. It was the first revenues had risen above half a billion dollars in an interim period.
Directors said the company “remained committed to its current dividend policy and would continue to pay around 100 per cent of it’s after tax profits to shareholders as interim and final dividends.”
To this end, Hills will pay an interim dividend of 13.5 cents per share, fully franked, compared to from 13 cents previously.
Earnings per share rose to 14c a share from 12.9c and the company said that the ration was kept as close to 100 per cent as possible.
CEO David Simmons said “Our policy hasn’t changed – we pay out around 100 per cent of earnings and in the last couple of years we’ve paid a little over 100 percent.
“If we’re within a point or two of 100 percent, plus or minus, we’re happy. It certainly shouldn’t be interpreted as any progressive reduction.”
And he said the company’s dividend re-investment program was being strongly supported by shareholders.
“We’ve had pretty consistent support of about 40 to 45 percent. The main reason is we’ve now got around 22,000 shareholders, whereas in the early days of the plan we had larger institutions, whose decision whether or not to reinvest could change the support level significantly.
“We’re relatively relaxed the plan will continue to get support.”
Hills operates in three areas: home and hardware, electronic security and entertainment and building and industrial products.
Its home, hardware and eco products division was the best performer with a 30 per cent rise in EBIT; the building and industrial products division saw EBIT rise 8.4 per cent; an EBIT in the electronic security and entertainment division rose by 7.6 per cent.
Mr Simmons told the Corporate file briefing on the ASX that in the first half “we experienced more of a cost-margin issue than any direct impact on consumer spending from interest rates.”
“Last year we had a lot of volatility in commodities from steel to oil-based products like plastics, which was very difficult to manage in terms of the short-term recovery of cost increases.
“In the first half, oil prices were actually down in comparison with six months before, albeit not dramatically, so our challenge was to drive down the inputs that have oil as their base. When commodity prices group, the increases come rapidly but when they come down, you’ve got to chase them.
“The other big issue has been transportation costs. We’ve had fuel surcharge levies applied across our businesses, and we’re working to make sure we get them aligned to where fuel prices are.
“Our business isn’t one that’s directly impacted by the vagaries of weather patterns but one potential risk to our earnings would be consumer confidence – it doesn’t take much to shake the level of confidence.
“Another risk is posed by the skills shortage, in that fabrication work associated with many of the major infrastructure projects could be done offshore and shipped in. It’s fabrication in Australia where we see opportunities, particularly in our Building and Industrial Products business.”
A week after building up a 6.7 per cent stake and suggesting closer co-operation and making a ‘confidential proposal’ Primary Health Care has proposed a “merger of equals” with its rival,Symbion Health.Read More