Steelmaker BlueScope has trimmed its full year earnings guidance, citing a decline in steel spreads and soft market conditions in its key Asian and North American markets. BlueScope said it expects underlying earnings before interest and tax of $1.35 billion, an increase of 6 per cent on the previous year versus prior guidance of a 10 per cent increase on 2018. A softer guidance implies second half earnings approaching $500m, Benchmark steel spreads across the half year are now expected to be approximately $US150 per tonne lower than the first half, compared to previous expectations of a $US130/t decline. Alongside the warning on earnings, BlueScope extended its buy-back program by a further $250m from its $250m program announced in December, what was said to be nearing completion now.
Coles Group Ltd (COL):
Coles Group is up 6.5 per cent to $13.54 after announcing plans to cut $1 billion in costs from its business over the next four years through technology and staff cuts. It will also slow down store roll outs and close unprofitable shops. Ahead of its first strategy day since being spun out from the Wesfarmers conglomerate as an independent company, Coles said the savings were needed to offset rising costs, including energy and wages. Coles chief executive Steven Cain said the company's other financial priorities were to deliver sales growth "at least" in line with market growth, and to maintain an "attractive" dividend payout ratio to shareholders.
Commonwealth Bank (CBA):
Bell Potter’s TS Lim now says CBA will hold its dividend at $2.31 fully franked for the half year. He previously predicted it would be trimmed to $2.15, but now says that was “overzealous” and that CBA was “well placed” to weather any higher NZ capital requirements, which he expected to account for half of an increase in its CET1 capital ratio of 10.7pc. Consistent with lower expected interest rates ahead, he has also reduced CBA’s cost of equity by a further 50bp to 10.0pc.“The net effect is a 7.5 per cent increase in CBA’s valuation/price target to $86.00 and the rating is upgraded to Buy,” says Mr Lim.
Macmahon Holdings Limited (MAH):
Mining services group Macmahon has added to its underground capabilities with the $48 million acquisition of specialist contractor GBF Group. In a note to the market this morning, Macmahon said the deal would immediately add underground scale and capability to help it capitalise on the significant level of underground opportunities with its current and potential clients. The purchase price comprises of an upfront $48m component, to be funded by cash and assumption of GBF debt, as well as two further earn-out payments which are subject to performance hurdles. The acquisition is expected to be complete by mid-August.
Mercantile Investment Company Ltd (MVT):
Corporate raider and majority shareholder of Mercantile Investment Company, Sir Ron Brierley, has completed a merger with Sandon Capital, first announced on 6 June. Sir Brierley has swapped 53 million shares in Mercantile, 18 per cent, for 11 million shares, or 18.9 per cent, of Sandon Captial. The deal was announced two weeks ago when Sir Brierley revealed he was stepping back from work commitments due to illhealth. He still holds 25 per cent of Mercantile.
Nearmap Ltd (NEA):
Shares in Nearmap are up 6.5 per cent today to an all-time high of $3.93 after Macquarie initiated coverage with an "outperform" rating and a target price of $4.22. This comes after Nearmap shares increased by 12 per cent, or 70 cents, in one week. Nearmap offers a global location intelligence on a subscription basis and has achieved 17 per cent market share in Australia "but the key US growth opportunity remains largely untapped", Macquaire's analysts note. "Nearmap's Australian operations highlight the attractiveness and profitability of the model at scale; 94.5 per cent gross margins and with a largely fixed open base, operating leverage is significant. With the US currently scaling, we expect similar characteristics to Australia over time." Nearmap's management believe its addressable market in Australia is about $350 million and about $US2 billion in North America.
Netcomm Wireless Ltd (NTC):
Telco equipment maker Netcomm Wireless has passed a pivotal hurdle in its $161 million acquisition by Nasdaq-listed Casa Systems, after shareholders today voted in favour of the scheme of arrangement. More than 86 per cent of the votes were in favour of the scheme, what will entitle shareholders to $1.10 cash for each share held. The deal remains subject to court approval, after clearing FIRB approvals in April, and if all goes to plan implementation date will be July 1. Under the terms of Massachusetts-based Casa’s offer, Netcomm become a fully-owned subsidiary of the US outfit, which offers network infrastructure services globally.
Pro-Pac Packaging Limited (PPG):
The packaging company Pro-Pac told the market it had been negatively impacted by a deterioration in trading conditions during the second half of the year, resulting in lower than expected revenues and margins. Accordingly, the company trimmed its full year earnings guidance to around $28 million. Pro-Pac said its flexibles and rigid businesses, including the recent acquisition of Perfection Packaging and Polypack, were trading broadly in line with expectations.
Qantas Airways Limited (QAN):
Qantas is giving its frequent flyer program a makeover in what it has called the biggest overhaul in 32-years. One of the oldest airline loyalty programs in the world, Qantas Frequent Flyers boasts 12 million members, and 450 partners with points used almost like a second currency in Australia. Qantas Group CEO Alan Joyce will join Qantas Loyalty chief executive Olivia Wirth for the “significant” announcement in Sydney on Thursday. Details are being kept tightly under wraps but the airline has recently provided new opportunities for frequent flyers, including a points only flight, and Airbnb listings giving members the chance to “buy” seats on overseas flights, at a fraction of the usual points.
Webjet Limited (WEB):
Travel booking site Webjet has detailed its blockchain-based hotel booking and payments systems while reaffirming its guidance for the full year. In presentation notes for an investor session with Ord Minnett, the company detailed its Rezchain and Rezpayments developments, what were originally unveiled early last year. Webjet says the Rezchain hotel booking blockchain is a critical component in decreasing its costs and improving earnings in its WebBeds business by FY2022. The company reaffirmed its earnings guidance of at least $120 million for the full year, excluding one-off costs associated with the acquisition of Destinations of the World, including all start-up costs associated with its Umrah holidays international venture.
(Source: AIMS)
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