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Summary
- The Information Technology and consumer staple sectors had been less sensitive during the COVID-19 pandemic than the overall Australian economy.
- Asaleo Care reported increased revenues in 1H FY20 ended 30 June, with a favourable FY20 guidance driving share price to settle 8.333% higher than the previous close, on 18 August 2020.
- Empired highlighted strong FY20 EBITDA along with increased NPAT for the period ended 30 June, propelling share price to close 11.11% higher than the last closing price, on 18 August 2020.
The Information Technology (IT) Sector and consumer staples companies had been less sensitive during the COVID-19 pandemic than the overall Australian economy. While the IT sector has facilitated an easy life and business environment, the consumer staple industry has gained because of meeting essential needs and panic buying.
On that note, let us discuss two ASX200 stocks, each from IT and consumer staple sector and see how they have performed in their latest earnings release.
Asaleo Care Limited (ASX:AHY)
A leading personal care and hygiene Company, Asaleo Care Limited produces and distributes personal care and consumer tissue products.
On 18 August 2020, Asaleo Care announced its 1H FY20 results for the period ended 30 June, driving share price to close 8.333% higher than the previous close.
Revenue from continuing operations increased by ~10% to $215 million in 1H FY20 over 1H FY19. The increase in revenue was backed by continued investment in brands to gain market share coupled by COVID-19 panic buying from March till June and successful NPD ranging & activation.
Asaleo Care highlighted Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) from continuing operations of $49.4 million, up by 24% from $39.8 million recorded in 1H FY19. The rise in EBITDA was driven by incremental margin from sales growth and benefits derived from pulp price that was offset by adverse FX rate and increase in significant insurance cost.
Statutory Net Profit After Tax (NPAT) went up by ~158% to $18.8 million from $7.3 million in 1H FY19. Asaleo Care reduced its debt by 14% in 1H20 period, totalling a reduction of 55% in the last 18 months. The Company’s net debt on 30 June was noted at $118.9 million.
The Company claimed to be on track to deliver an EBITDA in the range of $84-$87 million for FY20 ending December 2020.
Segmental performance
Business to Business Segment increased by 4.6% to 111.3 million in 1H FY20 from 106.4 million recorded in 1H FY19. B2B EBITDA jumped by 17.3% to $24.4m because of higher sales volumes and reduced pulp costs.
The segment experienced significant demand driven by panic buying critical products such as soaps, sanitisers, towel and wiping and cleaning products, as well as incontinence healthcare products.
Lockdown measures led to a drop in away-from-home activity that impacted sales from hospitality, office cleaning and education sectors, negatively. However, increase in demand for hygiene consumables in the healthcare and food processing sectors made up for the negative sales impact.
The Company continued to witness increased sales from its high margin, proprietary ‘Hero Systems’. Revenue of TENA healthcare jumped by 11%, with underlying growth in demand from the residential aged care and in-home care sectors. Revenue rose by 2.5% for Tork Professional Hygiene business.
Revenue from its retail segment rose by 15.6% to $103.6 million. Recently increased brand investments coupled with panic buying boosted sales and assisted the Company to increase its market share in maximum categories. Retail EBITDA jumped up by 31.6% to $25 million.
On 19 August 2020, Asaleo Care was trading at $1.035, down by 0.481 (at AEST 1:49 PM, with a market cap of $564.85 million.
Empired Limited (ASX:EPD)
Empired Limited operates as Information Technology Services Provider with an array of solutions assisting digital transformation for clients across Australia, New Zealand, and South East Asia and beyond.
On 18 August 2020, Empired Limited announced its FY20 results ended 30 June, driving share price to close 11.11% higher than the previous close.
The highlights from the full year report are as follows:
- FY20 Revenue went down by 6% YoY to $166 million whereas EBITDA remained unchanged at $19.0 million.
- NPAT increased by 139% to $6.1 million with operating cashflow up by 64% to $23.8 million.
- Net Debt was recorded at $4.4 million, significantly lower than $14.3 million recorded on 30 June 2019. The reduction was due to
- Significant focus on cash collections and lessening of contract assets (WIP) along with decrease in CAPEX on pcp
- Monthly contracted recurring revenue went up by 55% on 1 July 2020 over previous corresponding period backed by the following-
- Annual contract value of circa $5 million of new managed services contracts plus projects, and
- Western Power contract win, which is expected to add an estimated $61 million revenue over 5 years plus provide additional projects
- Revenue from New Zealand recorded a strong growth, up by 11% on pcp
- Revenue from Australia declined by 16% YoY because of disrupted trading conditions caused due to COVID-19, Main Roads WA contract transitioning out in Q1 FY20 and commencement of Western Power contract getting delayed till Q1 FY21
- Sales pipeline covering Australian East Coast went up by more than 30% at 1 July 2020 compared to pcp because of investments in salesforce consists of leadership expansion, sales teams across East Coast; experiencing a range of larger contract opportunities, and strategic managed services opportunities
- The Company has several material contract opportunities at advanced level to contest in FY21
- Empired signed a new 3-year IT Supply contract with Rio Tinto
On FY21 outlook front, Empired anticipates solid revenue growth in FY21 backed by 30% larger Australian East Coast sales pipeline and new revenues to add to the topline in FY21 stemming from new multi-million-dollar client wins. Revenue growth is expected to drive strong earnings and cash flow growth in FY21.
On 19 August 2020, Empired was trading at $0.55, climbing up by 10% (at AEST 2:13 PM), with a market cap of $80.14 million.
