What’s driving the upswing of Schaffer Corporation Limited’s (ASX:SFC) shares?

Summary

  • Schaffer Corporation Limited (ASX:SFC) announced a profit upgrade for the first half of FY21.
  • A fully franked FY21 interim dividend is also expected.
  • The Automotive Leather division experienced strong sales volumes.
  • The Company will release its half-year results on 17 February 2021.

The shares of diversified industrial company Schaffer Corporation Limited (ASX:SFC) were trading up by over 5 per cent at $ 18.5 per share, mid-day on 12 January 2021. The positive sentiment around the SFC shares seemed to have built after the Company announced a profit upgrade for the first half of FY21.

Consequently, even amidst the ongoing testing times, the Company is likely to pay an interim fully franked dividend to its shareholders.

Profit upgrade for first half of FY21

Statutory NPAT for H1 FY21 is predicted to be nearly $ 22 million (H1 FY20: $ 13.9 million). This comprises almost $ 10 million (H1 FY20: $ 3.2 million) non-cash, unrealised gains after tax on equity investments. The majority of these are linked to the Company’s investment in Harvest Technology Group Ltd (ASX:HTG).

However, the upgrade is subject to finalisation of results and half-year review by Schaffer Corporation’s auditors.

Source: AGM Presentation, Nov 2020

Interim dividend

The Company expects to pay a fully franked FY21 interim dividend of 45 cents for the period. This takes into consideration that Schaffer Corporation would have a material portion of FY21 first-half profits that are unrealised, non-cash investment gains.

The FY21 interim dividend will be confirmed when the Company announces its half-year results on 17 February 2021.

Strong sales volumes

Schaffer Corporation also informed that the Automotive Leather division had experienced strong sales volumes, having recovered from the low levels seen during the start of COVID-19. Most likely, this has been supported by the launch of new vehicle programs in China as well as Europe.

Automotive Leather, Source: AGM Presentation, Nov 2020

RELATED READ: Is There Any Value in Australian Automotive Aftermarket?

Recap to the year ended 30 June 2020

While the market awaits Schaffer Corporation’s FY21 half-year results next month, let us walk through the key aspects of the Company’s performance for the year ended 30 June 2020-

  • The predominant impact of COVID-19 was on the Company’s manufacturing operations.
  • Despite the pandemic-infused challenges, Schaffer Corporation achieved a record profit for the financial year.
  • Revenue was $ 156 million, NPAT was $ 23.6 million, EPS amounted to $1.72 per share and an operating cash of $23 million of was generated.

  • In such trying times, Schaffer Corporation’s annual dividends increased to 80 cents per share.

While Schaffer Corporation continues to remain conscious of the ongoing economic impact of COVID—19, it will be interesting to watch the Company unfold its much-anticipated half-year results in February 2021.

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