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S&P/ASX 200 Friday – my take on the APT, WOW & RHC reports

The S&P/ASX 200 (ASX: XJO) is expected to open slightly weaker on Friday according to ASX futures. Here’s what you need to know as we head into the final days of reporting season.

ASX 200 recap

It was a mixed day for the market on Thursday, the ASX 200 finished 0.2% higher despite trading up as much as 0.8% during the day.

It was the materials and consumer sectors driving the market higher, with BHP Group Ltd (ASX: BHP) and Woolworths Group Ltd (ASX: WOW) adding 1.1% and 2.8% respectively.

Woolies delivered a solid top-line result but trimmed its dividend. The standout was the buy now, pay later sector with both Zip Co Ltd (ASX: Z1P) and Afterpay Ltd (ASX: APT) reporting incredible growth and unique pivots for their businesses; shares finished down 4.6% and up 0.6% respectively after yesterday’s all-time highs.

Zip reported a 91% increase in revenue and an 87% increase in transaction volumes, whilst Afterpay delivered 103% in revenue growth.

I discuss these results and the landscape of the ASX BNPL sector more broadly with investment analyst Owen Raszkiewicz in the results recap video below:

Pandemic tailwind to flow into 2021 for Woolworths

Woolworths delivered a weaker than expected result, despite a 6% increase in revenue to $63.6 billion for the financial year. Shares closed 2.8% higher. Net profit fell 57% to $1.166 billion. Sales improved across the board with Australian and New Zealand Food up 8.3% and 10.5% respectively. BIG W’s turnaround continued, growing revenue by 10.5%, whilst Endeavour Drinks added 9.9%. Management declared a slightly lower dividend at 48 cents per share.

My take: Weaker than expected, but defensiveness on show in the dividend.

Operating leverage on show for Afterpay

Afterpay achieved underlying sales growth of 112% to $11.1 billion, while revenue was up 103% to $502.7 million and the net transaction margin came in at 2.3%. Management indicated that annual transaction growth is currently running at $15 billion. The company reported a net loss of $22.9 million, far better than the $52.4 million expected by analysts, supported by another fall in gross loan losses to 0.9% of their book. The incredible growth continues unabated, hitting 9.9 million active users and 55,000 merchants, but barely scratching the surface overseas.

My take: Another great result, but a difficult company to value.

Time to look ahead for Ramsay Healthcare

Ramsay Healthcare Ltd (ASX:RHC) bore the brunt of the pandemic with mass shutdowns of elective surgeries hitting what was a strong year to February 2020. Shares fell 0.5%. Ramsay reported a 43% fall in net profit to $337 million and cancelled its final dividend. Revenue actually increased 7.3% as the European expansion was included in portfolios, but particularly behind strength in its Australian operations, up 2.2% to $5.1 billion.

My take: Difficult year, but well placed for a boom in surgery, waiting lists and treatments post-pandemic.

Another messy result for Link, but PEXA booming

Link Administration Services Ltd (ASX: LNK) shares finished 9.5% lower as recurring revenue fell just 1%. Despite this, operating earnings dropped 17% to $294 million and net profit to $114 million. This resulted in a lower than expected dividend, 3.5 cents per share. The PEXA property settlement platform was the biggest highlight, with transaction volumes increasing 37% and 75% of all Australian property transactions occurring online. This supported revenue growth of 50% to $156 million and a tenfold increase in operating profit to $53 million.

My take: Messy result, dividend disappoints but PEXA remains a key growth engine.

More records overseas, Walmart to buy Tik Tok?

The S&P 500 moved another 0.2% higher overnight, experiencing a broad-based rally as Fed Chairman Jerome Powell outlined a new strategy for the US Federal Reserve and economy in general.

After decades of seeking, but ultimately failing to deliver on an inflation target of 2-3%, the central bank will now be more flexible and focused on stimulating employment, rather than prices. This will be achieved by ‘allowing’ inflation to run higher for periods of time, meaning the bank will not be forced to raise rates at the first signs of price, given the handbrake impact on the economy. The decision was well-received, as it ensures ongoing monetary support and a preference for jobs.

Meanwhile, Walmart Inc. (NYSE: WMT), yes Walmart!, joined Microsoft Inc. (NASDAQ: MSFT) for an official bid for Tik Tok’s US platform, sending both shares higher by 4.5% and 2.5%.

Back home on the ASX, expect reports from the likes of Harvey Norman Holdings Limited (ASX: HVN) and Boral Limited (ASX: BLD) in what will be the second-last day of August reporting season.

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.

The Golden Rules of Investing

We might be experts in retirement, but with combined financial advice experience of 35+ years, we’ve nearly seen it all. 

In mid-2023, our senior team at Wattle Partners Financial Planning put the finishing touches on a brand-new report “The Golden Rules of Investing“.

In this free report, we outline the key principles that determine all of the portfolio construction and investment decisions of Wattle Partners. Collated over decades, this paper should be seen as a work-in-progress, constantly under review in light of the ever-evolving nature of markets. 

You’ll find the free report on my Author page. Simply click the button below to view the Golden Rules.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Disclosure: At the time of publishing, Drew Meredith holds shares of Zip Co and Link Administration in his super fund.

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Wattle Partners is a financial advice firm, servicing clients around Australia, specialising in retirement planning (pre and post retirement). 

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