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Streaming from the marketing tact of converting the customers’ need into a want, consumer discretionary is a sector that entails non-essential products and services for consumers. Consumer buying, purchase behaviours, household expenditure are some of the driving forces for improving and sustaining the sector.
As stated by S&P, the Consumer Discretionary Sector includes a wide variety of industries in both services and manufacturing segments. The services segment comprises of restaurants, hotels, other leisure-related services, retailing, consumer services, and media-related services, among others. Industries under the manufacturing segment encompass household durable goods, automotive, apparel and textiles, and leisure equipment.
On ASX, S&P/ASX 200 Consumer Discretionary (sector) is an index to benchmark the companies related to the consumer discretionary sector. The index has 24 constituents and ended the day’s trade at 2,515.08 on 02 March 2020, with 8.23 per cent return on a one-year basis.
Also Read: Changing trends for Consumer Discretionary stocks – PBH, KGN, RDC, ALG
Let’s have a look at consumer discretionary companies operating in different sectors and witnessing their financial and stock performances.
HVN’s EBITDIA is 15.7 per cent up
An ASX-listed company, Harvey Norman Holdings Limited (ASX:HVN) is into the business of selling homewares and consumer electricals.
- In Australia, there are 544 franchises and 194 franchised complexes
- Globally, HVN has 95 offshore Harvey Norman® company-operated stores
With the release of half-year FY20 results for the period ended 31 December 2019, HVN has also declared a dividend distribution making it a high dividend-paying company.
- For the six months, fully franked dividend distribution of 12 cents per share was announced by the board. The dividend is to be paid on 04 May 2020 to shareholders, and the record date is 03 April 2020.
- With the annual dividend yield of 7.64 as on 28 February 2020, HVN has a consistent upward trending dividend history since 2017.
During the six months, Harvey had opened one franchised complex in Australia and five company-operated stores in Malaysia, although two Harvey Norman® franchised complexes were closed in Australia.
- Sales Revenue generated from Company-operated stores stood at $1.24 billion, an increase of 5.5 per cent or $63.84 million compared to pcp.
- EBITDIA stood at $443.43 million, an increase of $60.06 million compared to pcp (First half FY19: $383.37 million).
- PBT, excluding AASB 16 net impact, for the period was $285.87 million, up 2.4 per cent compared to pcp (first half FY19: $279.12 million).
- EPS stood at 17.70 cents, down 7.4 per cent compared to the first half FY19 (19.12 cents)
- Net Debt to Equity Ratio of 16.57 per cent, an improvement from the 22.35 per cent reported in pcp.
- Net assets were $3.3 billion, an increase of $132.53 million or 4.2 per cent compared to pcp.
The snippet of the performance is presented below:
The increase in profitability of retail stores of Ireland & Northern Ireland (up 20.3 per cent) were led by double-digit growth across 13 company-operated stores in Ireland and two stores in Northern Ireland.
The fall in reported PBT (-4.6 per cent) was due to the decrease in revenue from franchisees (by 4.2 per cent or $21.92 million pcp) which is because of reduction in franchise fees received from franchisees.
There was considerable growth in the technology class driven by with robust performance in connected wearables and health, hardware, accessories, mobile handsets and connected home. The Company’s Irish business also witnessed substantial growth in its digital strategy, encompassing both digital traffic and online sales increasing at a remarkable rate.
Going forward, the Company has plans to open a new store in Ireland at Galway (in April 2020) and in Sligo (by the start of August 2020), two new stores in Singapore and two new stores in Malaysia.
Stock performance
On 02 March 2020, HVN’s stock last traded at $3.62, a decline of 2.426 per cent as compared to the previous close.
There was a significant downfall in the price of the stock on the release date of its half-yearly results (28 February 2020), with the stock price closing at $3.71, a significant decrease of 14.12 per cent from its previous closing price.
The stock of the company has generated negative returns of -11.24 per cent and -8.85 per cent in the period of 1 month and YTD, respectively.
PWH delivered fully franked dividend
An Australian-based company, PWR Holdings Limited (ASX:PWH) is engaged in the design and the manufacturing of cooling solutions for the automotive industry.
On 28 February 2020, the Company released its first half FY20 results for the period ended 31 December 2019. An interim dividend distribution was declared for 1.9 cents per share which is 100 per cent franked and is an increase of 19 per cent on pcp. The record date for determining entitlements to the dividend declared is 18 March 2020 and payable on 27 March 2020.
FY20 capex program is well advanced with commissioning and installation of CT scanner, vacuum braze equipment and 3D printers which is due for H2 FY2020.
During the period, growth and Capex are fully cash funded. Also, there was no change in the long-term debt of £2 million.
Other key highlights are mentioned below:
- Revenue stood at $29.8 million, an increase of 20.3 per cent from $24.8 million in pcp. Viewing the sales growth by category, 81 per cent of the revenue growth came from emerging technologies and OEM.
- Statutory EBITDA increased by 51 per cent, from $5 million to $7.6 million.
- NPAT was reported at $3.5 million, up 10 per cent from $3.1 million in pcp.
- Statuary Operating cash flow increased by 48 per cent on pcp, from $3.7 million to $5.4 million
- Despite the robust growth in revenue, a decrease of 12 per cent was witnessed in working capital invested.
- As on 31 December 2019, cash on hand was $7.9 million (as compared to $6.8 million in 2018).
Outlook for 2H FY20 and FY21:
- Organic revenue growth for emerging technologies and OEM is expected to continue through FY2020, FY2021 and thereafter.
- From July 2020, the new UK facilities would commence at Silverstone.
- Capital expenditure program has been expanded for productivity benefits and projected growth.
Stock performance
On 02 March 2020, PWH’s stock last traded at $4.330, an increase of 0.698 per cent as compared to the previous close. However, a downfall in price was witnessed on the date of release of its half-yearly results (on 28 February 2020), with the stock price closing at $4.3, a decline of 5.495 per cent from its previous closing price.
The stock of the company has given negative returns of -6.32 per cent and -8.7 per cent in the period of one month and YTD, respectively.
