ASX Surprises: Latest and Few on the Cards: AGG, NCK

Summary

• Amid the tough pandemic challenges, there are businesses that continue to write success stories.
• AngloGold Ashanti registered a surge in free cash flow generation, to an inflow of AUD 177 million in 1H20 from an outflow of AUD 31 million in 1H19. Solid production performance witnessed from Geita, Iduapriem and Serra Grande.
• Nick Scali exceeded its recent guidance for FY20 net profit after tax, while written sales orders grew by 9 per cent to AUD 293.2 million. With a final dividend of 22.5 cps, total dividend for the year stood at 47.5 cps.

The world is going through tough times, as there are multiple challenges on many levels. The ongoing COVID pandemic is the most disruptive time in recent history, which is redefining the way people are living all across the globe. All the countries are battling a tough fight with this deadly virus, and COVID 19-led restrictions have hugely impacted economic activities.

However, during these unprecedented times, there are several companies that seem to have marginal or no impact. Such businesses are continuing to achieve their goals while moving forward uninterrupted.

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On that note, let's discuss two ASX-listed businesses, AGG and NCK, which are moving forward with minimal impact amid the pandemic.

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AngloGold Delivered Solid H1 Production Performance and Surge in FCF

Global gold mining company, AngloGold Ashanti Limited (ASX:AGG) has mines and exploration projects in four different regions - Australasia, Americas, Continental Africa and South Africa.

On 7 August, AGG released its half-year report for the period ended 30 June 2020, highlighting a solid production performance and a surge in free cash flow (FCF) generation, weathering COVID-19-related disruptions.

Increased FCF: The first six months of the year witnessed an increase in free cash flow (FCF) to an inflow of AUD 177 million compared to an outflow of AUD 31 million in the corresponding period of the previous year. Around AUD 173 million was generated in Q2, and free cash flow before growth capital increased nearly fivefold or by 376 per cent to AUD 324 million.

Production Performance: For six months ended 30 June 2020, production was 1.469Moz at a total cash cost per ounce of AUD 810/oz. In the same period a year ago, the performance was 1.554Moz at AUD 792/oz.

Q2 production was up by 5 per cent over the first quarter of 2020, rising to 753,000oz from 716,000oz. Quarter-on-quarter production additions were recorded at Iduapriem, Obuasi, Geita, Siguiri, Sunrise Dam, Serra Grande, and Cerro Vanguardia (CVSA).

EBITDA: Adjusted EBITDA for the initial six months grew by 59 per cent to AUD 1.096bn compared to AUD 689 million on PCP. Factors that contributed included a 26 per cent year-on-year jump in the gold price received and lower local currency impacts.

Balance Sheet: The gold miner continued to strengthen its balance sheet, as improved cash flows helped in reducing debt constantly. Adjusted net debt decreased by 18 per cent to AUD 1.428 billion at end-June 2020. AGG took proactive measures to improve liquidity further. On 30 June, its available liquidity was nearly AUD 2.47 billion including cash and cash equivalents of AUD 1.29 billion.

Outgoing CEO, Kelvin Dushnisky commented that the business is doing very well and benefitting from the high gold price. Cash flows are robust, and capital management will continue to be the main focus, while AGG will catch up with the increased margin and reserves.

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As Mr Dushnisky has decided to step down from his position effective 1 September 2020 and the Board embarked on a comprehensive recruitment process to find a new permanent CEO, Ms. Christine Ramon, currently CFO and Executive Director, has been appointed as Interim CEO.

On 10 August 2020, AGG closed the day's trade at AUD 8.830, down by 4.644 per cent. The company has a market cap of AUD 17.73 billion and its stock has delivered a return of more than 59 per cent in the last six months.

Nick Scali Exceeded FY20 Guidance of Underlying NPAT

On 6 August, furniture retailer, Nick Scali Limited (ASX: NCK) released its results for the year ended 30 June 2020, reporting underlying net profit after tax (NPAT) of AUD 42.1 million, above recent mid-June guidance of AUD 39-40 million. EBIDTA was up by 2.5 per cent to AUD 65.7 million as compared to AUD 64.1 million in FY19.

However, sales revenue dipped by 2 per cent to AUD 262.5 million. Written orders grew by 9 per cent with same-store sales orders increased by 4 per cent. May and June's sale orders increased by 72 per cent year on year. The gross profit margin for FY20 was 62.7 per cent. NCK launched online store across all product categories in April, gaining more than AUD 3 million in sales orders for the quarter.

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Dividend: The directors have announced a final dividend (fully franked) of 22.5 cents per share, with a record date of 6 October 2020 and payment date of 27 October 2020. Consequently, the full-year dividend stood at 47.5 cents per share, representing a payout ratio of 90 per cent.

Outlook: In May and June, sales orders recovered drastically, and July followed the trend. In July, trading remained resilient with written sales orders increased by 70 per cent on PCP. The orders will be delivered in Q1 and will contribute to revenue of FY21. The company is expecting the first-half profit of FY21 to be up by a minimum of 50-60 per cent year-on-year.

Managing Director, Anthony Scali commented on the results stating that, recently, the furniture industry witnessed a fantastic year on year growth, with more spending from consumers on home improvement as they are spending more time at home.

On 10 August 2020, NCK closed the day's trade at AUD 8.320, down by 4.478 per cent. The company has a market cap of AUD 705.51 million and its stock has delivered a return of more than 41 per cent in the last one year.

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