Management changes – Costa + NHF

While changes in management may seem a small change to the most people, it is one of the most challenging and critical decisions taken by a firm. The change in management takes on account the change in employees or the changes in the top management of the company. This may do good to the company and help it to implement modifications in technology and other systems. The success post such change is more dependent on how the employees of the organization adopt these variations and utilize these in their day to day work. This is not a minor change which can be helped with training, it is more about managing resistance from a use of holistic set of tools to drive individual and organizational change.

One important thing to note here is that there is no change in the organisation, people within the organisation change. If the individual do not work to the required changes, this transformation will not work and hence would result in countless consequences, for instance, decline in productivity on a larger scale, unwillingness of managers to devote their time needed to support the change, negative impacts on customers, high turnover rate in employees etc.

But the change in management increases the likelihood of success and is more likely to meet the objectives than the organization with poor management.

Let us see how the changes in management has affected the listed stocks in Australia.

Costa Group Holdings Limited (ASX: CGC)

Costa Group Holdings Limited (ASX: CGC) is Australia’s leading horticulture group which is engaged in the packing, marketing and distribution of fruit and vegetables within Australia and to export markets. As on 24 December 2019, the market capitalization of the company stood at $1,000 million.

Resignation of CFO: The company has recently announced that Linda Know, Chief Financial Officer has resigned from the post effective as of 1 May 2020. The company has also announced the completion of the retail shortfall bookbuild where 10.8 million retail entitlements were offered for sale at a clearing price of $2.50 per new share, representing a $0.30 premium to the offer price.

Financial Highlights: For the half year ended 30 June 2019, revenue of the company stood at $573 million, representing a growth of 11.8% on the prior period. This was mainly due to increased table grape marketing volume and international growth from China and Morocco. For the same time span, Statutory NPAT stood at $41.1 million. The company also declared a fully franked interim dividend of 3.5 cents per share.

Financial Performance (Source: Company Reports)

What to Expect from CGC Going Forward: China expansion is on track to achieve 5-year roll-out plan by 2020 with planning underway for further expansion in 2021. The top management stated that if the quality of some of the crops is impacted, it is estimated that there may be an impact in EBITDA-SL ranging between $4 million to $6 million and a subsequent impact in NPAT-SL ranging between $3 million to $4 million in CY20. The company also expects the outlook for the 2019 citrus season is solid. CGC is working deeply to mitigate the 2019 challenges. Concurrently a highly focused efforts are made on major initiatives to ensure strong delivery 2020-2022 and beyond.

Stock Performance: The stock is currently trading at $2.530, up by 1.2% on December 24, 2019. As per ASX, the stock of CGC gave a negative return of 31.39% in the span of 6 months and a negative return of 0.79% in the past 30 days. This led the stock to trade close to its 52-weeks’ low levels of $2.320. In terms of valuation, the stock of CGC is trading at a P/E multiple of 8.880x and is earning a dividend yield of 3.48%.

Nib Holdings Limited (ASX: NHF)

Nib Holdings Limited (ASX: NHF) is a private health insurer in New Zealand and Australia. The Company underwrites and distributes private health insurance to both New Zealand and Australian residents. International students and visitors to Australia are also been offered similar services. As on 24 December 2019, the market capitalization of the company stood at $3.03 billion.

Changes to Senior Executive Team: The company has recently announced that Mrs. Michelle McPherson, Chief Financial Officer and Deputy Chief Executive Officer has resigned to take on another CFO role. The company has also announced the appointment of Matt Paterson as Group Executive Business Services with effect from 3 February 2020, with responsibility for operational contact centers and claims functions across the Group.

Lowest Premium Change In 17 Years: The company has received approval from the Minister to increase insurance cover premiums for nib health funds by an average of 2.90% across all products with effect from 1 April 2020. The company has recently announced the creation of a specialist healthcare data science and services company from a joint venture with Cigna Corporation, each contributing $10 million in start-up funding, for the purpose of delivering better health outcomes for members and communities generally.

Decent Increase in the Underlying NPAT: During the financial year, revenue of the company increased by 8.3% and stood at $2.4 billion and NPAT (Net Profit After Tax) of the company stood at $149.3 million, up by 11.8% on the previous period. This increase resulted in statutory earnings per share of 32.9cps, reflecting an increase of 11.9%. The company also declared a full year dividend of 23 cents per share.

What to Expect from NHF Going Forward: The company has reaffirmed its financial year 2020 underlying operating profit guidance and expects it to be at least $200 million, with a net margin of approximately 6%. The stock of NHF is currently trading at $6.510, down by 1.958% on December 24, 2019. As per ASX, the stock gave a return of 29.18% on the YTD basis. On the valuation front, the stock is trading at a P/E multiple of 20.180x and is earning a dividend yield of 3.46%.

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