The S&P/ASX 200 (ASX: XJO) is set to open flat on Friday according to data from the Sydney Futures Exchange. Here’s what you need to know as we close out a busy week of ASX reporting season.
ASX 200 recap
The ASX 200 started Thursday strongly, but finished on its lows (-0.7%) as investors digested a flurry of earnings reports from AMP Limited (ASX: AMP), Telstra Corporation Ltd (ASX: TLS), and AGL Energy Limited (ASX: AGL).
Most sectors fell, with telecommunications off 4.7% and the banks giving back recent gains, down 1.1%. The leaders for the day included Treasury Wine Estates Ltd (ASX: TWE), adding 12.3% after delivering better than expected sales growth, and Premier Investments Ltd (ASX: PMV) who reported record profits despite being recipients of JobKeeper and refusing to pay rent on many of its properties.
Unemployment data showed an increase to 7.5%, meaning 1 million people are now out of work, and this is before Stage 4 lockdowns in Victoria. Once again, my views on the key takeaways from yesterday’s reports are as follows:
AMP stems the bleeding
Despite a series of self-inflicted pain and missteps, AMP has shown signs of bottoming, announcing a special dividend of 10 cents per share following the sale of AMP Life. The AMP share price rallied 10.9% as a result. Underlying profit was $149 million, a 42% fall on 2019, but outflows from wealth management were just $1.2 billion. Management has acquired the 15% of AMP Capital it doesn’t own, affording full control of this $200 billion growth engine.
Summary: A solid result, capital return and renewed focus on growth.
Telstra maintains dividend
Despite reporting in line with guidance, a 14.4% fall in net profit to $1.8 billion, and maintaining its dividend, Telstra ended the day down 8.3%. Investors were clearly concerned about management’s guidance on the lingering impacts of COVID-19, ignoring the $40 million profit growth excluding NBN losses. Telstra has ramped up its 5G connectivity, targeting 74% of the population by June 2021, leveraging off the surge in digitisation.
Summary: Good signs for this digital infrastructure business.
AGL runs out of franking credits
AGL reported a 12% increase in statutory profit, benefitting from the revaluation of electricity futures contracts, but profit actually fell to $816 million. The final dividend was cut 18%, sending the AGL share price down 9.6%, the worst performer in the ASX 200. Of greatest concern was management’s decision to cease paying franking credits, as years of losses have eaten away at their reserves.
Summary: Difficult period ahead for the coal-reliant company.
S&P 500 weaker, Apple rallies on new service
The S&P 500 remains just shy of its record, falling 0.3% on Thursday, as cyclical sectors continue to sell-off whilst investors await an announcement on further stimulus.
Once again, the Nasdaq finished 0.3% higher, on the back of an announcement that Apple Inc. (NASDAQ: AAPL) would be launching Apple One, a subscription service that includes their many products in a simple package; it seems they are heading in the same direction as Adobe Inc. (NASDAQ: ADBE) as they seek to lock in annual revenues.
At the time of writing, the ASX 200 looks to open slightly weaker, with Newcrest Mining Limited (ASX: NCM) and Baby Bunting Ltd (ASX: BBN) due to report earnings.
For a run-down on all the biggest reports on the ASX this week, check out our ASX Results Recap video.
This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. To get in contact with Drew, click here to visit the Wattle Partners website.
