ASX Earnings Season Trends: GUD CCP TPW

Summary

• Investors had been waiting for the June quarter results edgily as the effects of the lockdown, and social distancing get subsumed in the results.
• As a major highlight, consumer discretionary player, GUD Holdings Limited, recorded a strong cash position backed by 98% cash conversion and have announced a dividend distribution
• A financial company, Credit Corp Group, boasted a strong cash position of A$400 million in cash and undrawn credit lines combined with an annual cash generation of A$175 million, despite reporting diminishing earnings
• In the consumer discretionary sector, Temple & Webster established themselves as an example to reckon with by reporting a 74% increase in revenue year-over-year backed by better terms with suppliers, investment in technology and platform with a diversified range of products

Its earnings time once again! Investors had been waiting for the June quarter results edgily as the effects of the lockdown, and social distancing gets subsumed in the results. While few industries experienced sky-rocketing business because of the technology and ease of life solutions provided, many sectors sailed through the phase with cost cutting measures, limited operations and availing government benefits.

Below are three companies who have recently published their June quarter earnings. The companies belong to the consumer discretionary and financial sectors. While the consumer discretionary showcases products that are “good to have” but not essentials, the financial industry is one of the most severely impacted segment during the COVID-19 pandemic.

Let us decode their numbers and see how they have fared during this unprecedented time.

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GUD Holdings Limited (ASX:GUD)

Share price of GUD is currently trading at A$11.410 (AEST: 11:46am) on 30 July 2020, down by 0.436% from its previous close. In the last three months, the company gained 26.35% on ASX, reflecting investors’ confidence in the company.

GUD Holdings engages in manufacturing, distribution, and sale of industrial goods such as automotive products, pumps, pool, spa, and water pressure systems. The company operates from Australia, New Zealand, and France.

Key Financial highlights

• The group recorded a 1% increase in revenue to A$438 million despite H2’20 impacted profoundly due to COVID?19. Volume of Automotive sales in H2’20 was lower than H1’20 sales volumes because of lower end user demand from partial or total lockdowns and reseller destocking due to COVID?19 that resulted in negative operating leverage.
• Underlying EBIT was recorded at A$80.7 million, which was down by 9% over the prior corresponding period and down by 10% on a pre?AASB 16 basis. Reported EBIT was A$74.3 million, a 15% decrease over pcp.
• Underlying NPAT dropped by 21% on pcp and fell by 16% on a pre?AASB 16 basis. If write back of tax provisions in both periods are excluded, underlying NPAT showcases a drop of 14% on pcp.

Cash flow and the balance sheet remains robust

The company recorded a strong cash position backed by 98% cash conversion before internal targets attributed to the timing of Q4 purchases and effective inventory management. The company refinanced its debt in January 2020.

The company suffered unanticipated cost impacts in the second half of FY20 with a one-off corporate cost totalling A$1.3m, incentive reconciliation between the halves of A$0.8m and increasing COVID costs along with unhedged FX.

Dividend Announcement

The company announced a franked 12 cents final dividend per security to be paid on 28 August 2020, representing an annual payout of 67% of underlying NPAT.

Outlook

The company claims to be well posited with regards to the execution of the medium?term growth strategy with a strong focus on creating business operational fitness across the group. The company has not provided any guidance because of an uncertain changing demand environment influenced by government stimulus and lockdown measures.

Credit Corp Group Limited (ASX:CCP)

Share price of CCP is currently trading at A$18.92 (AEST: 11:46am) on 30 July 2020, up by 4.473% from its previous close. In the last three months, the company gained 9.43% on ASX, reflecting investors’ confidence in the company.

Credit Corp Group operates as a buyer of consumer and small business debt in Australian, New Zealand and the US. Clients include banks and finance companies, telecommunication, and utility companies.

Key Financial highlights

• The group recorded A$15.5 million net profit after tax (NPAT) at FY2020 after adjusting additional provisioning due to COVID-19 impact and an impairment of purchased debt ledger (PDL) assets. NPAT without these adjustments stood at A$79.6 million, an increase of 13% over previous year.
• The company generated a free cash flow of A$110 million in the H2’20 and have secured A$152 million through equity raising, thus strengthening its balance sheet significantly. The strong balance sheet will assist in facilitating continued purchasing and lending during an extended period of time.
• By the end of the quarter, Credit Corp is debt free and has A$400 million in cash and undrawn credit lines combined with an estimated 12-month cash generation of A$175 million.

No issuance of dividend

Credit Corp has announced non-payment of final dividend for the FY’20, however, expects to recommence paying a dividend in FY’21, subjected to assessment of capital position and investment outlook.

Outlook

The Company expects the consumer loan book to stabilise as lending demand rises aligned to the ongoing withdrawal of temporary support. The Company has received increased interest in debt sale from major clients in all jurisdictions with few clients in the US expecting up to 80% growth in sale volumes in 6 to 12 months’ time.

Guidance

Credit Corp anticipates profitability in FY’21 and has presented guidance that showcases:

• PDL acquisitions in the range of A$120 - A$180 million
• Net lending volumes between A$(5) - A$5 million,
• NPAT in the range of A$60 - A$75 million,
• EPS between 89 - 112 cents
• DPS shall be between 45 - 55 cents

Temple & Webster Group Limited (ASX:TPW)

Share price of TPW is currently trading at A$7.940 (AEST:11:46 am) on 30 July 2020, down by 0.626% from its previous close. In the last three months, the company gained 109.71% on ASX, reflecting investors’ confidence in the company.

Temple & Webster Group is engaged in online retailing of third-party produced furniture, home decor, arts, and homewares in Australia.

Key Financial highlights

• The company experienced a 74% increase in revenue to A$176.3m up year on year with revenue recorded in the second half of FY’20 up by 96% over pcp and Q4 revenue up by 130% over pcp.
• EBITDA increased to A$8.5 million over A$1.5 million in pcp, representing 483% growth YoY
• Positive Cashflow recorded with the year ending at A$38.1m with no debt excluding proceeds from a recently secured A$40m placement
• Active customers increased by up 77% annually
• Trade and Commercial division revenue experienced an uptick of 68% annually

The company highlighted starting FY21 with strong sales recorded in July, in line with the growth rates experienced throughout Q4.

Temple & Webster is following a high growth strategy leveraging on the structural shift towards online and take advantage of both organic and inorganic opportunities. The company made a small investment into an AI based interior design start up in the second half of FY20.

Do Read: Temple & Webster is on a High, But Competition is Catching Up