27 Aug 09 - Reporting wrap

Woolworths

Gambling company Tatts Group produced a profit of $277m, up 8%. A fully franked final dividend of 11 cents was declared. Lotteries was the standout division, although wagering also performed well, with little sign of the competition that Tabcorp complained about (and which we’ve been concerned about). Indeed, Tatts’ commentary on its wagering business was positively upbeat. We fail to see how Tatts will be unaffected by online betting and the Northern Territory bookmakers, which explains our negative view. But if you want further information, head to the company’s results or this news report.

Roc Oil

This oil production and exploration company announced a half-year headline net loss of US$14.2m, from production of 2.1m barrels. There’s some useful information on the company’s resources in this half-yearly results presentation, or this press report.

As expected, Crown’s 2009 result was spoiled by writedowns from its ill-timed and expensive overseas acquisitions. These ended up totalling a massive $1,470m including $593m for its minority stakes in various casino groups, $378m for its aborted Cannery acquisition in Canada and $231m for its Gateway business in America. Crown’s underlying net profit was down 24% to $281m despite a 3% increase in profit from its two Australian casinos, Crown and Burswood. The overall result was lower due to higher interest expense and losses at its other casino investments including Macau, Aspinalls and Gateway. The result was messy so we suggest you read this press report for more information. Stay tuned for a full review of the company, though we’re not rushing as it doesn’t look cheap.

Infomedia

There aren’t many companies confidently predicting 24 – 33% profit growth for the coming year, as Infomedia is. Though the view through the rear vision mirror isn’t so pretty. Net profit for 2009 fell by 20% to $10.5m. Earnings per share fell by a lower amount due to a share buyback and a 2.1 cent final dividend (franked to only 0.7 cents) was declared, bringing the full year payment into line with the our January forecast (though the franking level was lower than we’d anticipated). The stock remains debt free and continues to pass through its profits almost entirely as dividends. Those are desirable attributes in the current environment. We’ll be taking a closer look at the result shortly and, in the meantime, you can download the result itself or management’s presentation.

Virgin Blue’s 2009 result confirmed two things: its underlying business is still profitable but the company has a debt problem. The company’s headline result was a loss of $160m, which included $133m in losses from fuel hedging, $74m in start-up costs for V Australia and a tax benefit of $66m. Virgin’s local business reported a profit of $57m, but its new long haul business to America lost $64m. Over the year the company’s net debt increased from $883m to $1,303m as its $128m in cash flow was offset by net new aircraft spending worth $556m. Since June Virgin has raised $231m in new equity which should keep it going a bit longer. As we’ve ceased coverage on this company we suggest you check out its results announcement or this press report for more information.

Oz Minerals

Oz Minerals announced a half-yearly net loss of $581m, but this was badly distorted by the net loss on the sale of assets during the company’s liquidation phase. Refer to the half-year results presentation for more detail, or this media summary. Diversified listed property trust GPT Group announced a 22% fall in half-year underlying earnings, to $183m, following a raft of asset sales, and a statutory loss of $1.2bn, which reflects property revaluation losses and the writeoff of the disastrous Babcock & Brown joint venture. GPT Group expects to pay a 4.5-cent distribution for the full-year, but we’re expecting potentially less than 4 cents in 2010 as more properties are sold and vacancy rates rise. Higher cap rates could also reduce net tangible assets below GPT’s current security price over the next 12 months. To get the blow by blow account of the result we recommend reading GPT’s results presentation and this press release provides a summary. We don’t follow the fortunes of property funds manager Valad Property Group closely, but its full year result was every bit the horror show that we expected. Given the group’s uncertain outlook, management isn’t providing earnings or distribution guidance for 2010. If you’re game, you’ll find the gruesome details in the group’s results presentation. Retirement village developer FKP is one of our least favoured property groups, so we’re staying young by wasting little time on its full year result, which included a 1.45-cent unfranked distribution. Those not aged from following FKP over the past two years might enjoy the results presentation, but for everyone else we recommend this press release. We’re not actively covering taxi payments company Cabcharge given the regulatory uncertainty surrounding the business, but this didn’t impact its full year result. Revenue increased 1%, to $174m, and net profit rose 4%, to $61m. A final dividend of 17 cents was declared, in line with 2008. Overall it was a good result, but turnover declined in the second half as corporate customers reined in travel expenses. If you’re a shareholder we highly recommend reading the pithy results presentation and this AAP press release published in the Brisbane Times. Healthcare products wholesaler Blackmores is one we’d like to own but it never seems cheap enough, perhaps because of healthy full year results like these; revenue increased 12%, to $201m, and net profit increased 9%, to $21m. Management lifted the fully franked final dividend to 57 cents per share, from 51 cents in 2008, and expects a marginal increase in profit in 2010. Blackmores is forging ahead in Asia without a Blackmore family member at the helm for the first time, as you’ll discover in the company’s results presentation or annual report, and this news release from The Age published in The Sydney Morning Herald. Junior property group Abacus Property’s full year result showed a 21% fall in underlying profit, to $138m, but the statutory loss, which includes property revaluation losses, came to $102m. Although management is aiming to pay a 3-cent distribution in 2010, falling occupancy rates (currently averaging 90%), mounting bad debts from loans provided to developers and potentially having to bail out its suite of highly leveraged funds are big hurdles; fortunately Abacus is well capitalised and has a cornerstone stakeholder with deep pockets. We highly recommend reading the group’s results presentation, which provides a lucid account of the company’s situation.

Super Cheap Auto

This retail group’s numbers all headed in the right direction in 2009. Revenue rose 16% to $829m and net profit was up 25% to $32m. Earnings per share rose 25% to 30.2 cents and the fully franked final dividend of 11.5 cents was up strongly on last year’s 7.5 cents. Same store sales growth was impressive, as was operating cash flow. The main negative issue that presented itself in our brief analysis of the financial statements was the $130m in debt. That feeds into a net debt-to-equity ratio of more than 73%, which is much more than we’re comfortable seeing in a specialty retailer. Particularly one which Mr Market is asking a hefty PER of 15 for. The debt won’t pose any problems if the business continues to fire. But should consumers retreat int their shells at some point, it will magnify any operational issues. At today’s price, we’re content to remain appreciative spectators. If you’d like to examine the impressive numbers, though, you can download the source document.