MID MORNING MARKETS 25-02-19

The ASX 200 is up 14 points in mid-morning trade with +ve trade developments the theme. Banks flat and resources rise on stronger commoditiy prices. IT the standout after strong result from APX and post-inquiry APT euphoria. LLC dumps Engineering business and GEM just dumped again. #ausbiz

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COMPANY NEWS

  • Boral (BLD) – Underlying activity in key markets remains solid; adverse weather in key US markets slowed activity. Australia – Revenue up slightly with higher contributions from Quarries, Cement and Asphalt but lower Concrete & Placing revenue. Lower earnings and margins primarily reflect: lower Concrete volumes and inefficiencies from project delays and wet October in NSW. less favourable product and geographic mix; Prices3 up 1-3% across Quarries, Cement and Concrete but not sufficient to offset cost inflation. North America – Revenue increase largely driven by strong growth in Roofing, Volumes impacted by extreme rain in key US states, EBITDA growth and margin expansion due to price increases and synergies; Fly Ash EBITDA margins steady at ~ 24%, Cost increases include higher materials and labour, Synergies of US$14m achieved, with business on track to deliver US$25m target in FY2019

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  • Lend Lease (LLC) – Profit after Tax of $15.7m and earnings per stapled security of 2.8c; Interim distribution of 12 cents per stapled security; Development pipeline of $74.5bn, up 31%; FUM up 20% to $34.1bn; $500m pre-tax impact from previously announced expected losses on Engineering projects. Outlook – Construction backlog revenue for the Building businesses stands at $14.8 billion with an additional approximately $10 billion of preferred work at 31 December 2018. The Investments segment is in a solid position to continue to deliver recurring earnings derived from the $3.6 billion of investments, $34.1 billion in FUM and $26.6 billion of assets under management. “A review of Engineering and Services has determined the business is non-core, and is no longer a required part of the Group’s strategy. Alternatives for the business are being considered
  • Nanosonics (NAN) – Record first half sales, up 36% to $40.7m; trophon®2 successfully launched in North America, Europe and Australia end August/September; Continued strong installed base growth with global installed base increasing to 19,310, up 20% in last 12 months and 9% in last 6 months. Capital sales of $16.4m up 11% on pcp and 52% on prior half; Sales of $24.3 million associated with consumables and service up 59% on pcp and 22% in prior half; Operating profit before tax of $11.0m up 195% on pcp and 493% on prior half;  Cash balance up $1.8m to $71.3m; Distribution agreement with GE Healthcare expanded to include Denmark, Finland, Spain and Portugal; Preliminary clinical study in Japan demonstrates over 90% of probes studied contaminated; New product development program progressing well; Three senior executives appointed to leadership team (February 2019) to support growth strategy.
  • Nanosonics (NAN) – Record first half sales, up 36% to $40.7m; trophon®2 successfully launched in North America, Europe and Australia end August/September; Continued strong installed base growth with global installed base increasing to 19,310, up 20% in last 12 months and 9% in last 6 months. Capital sales of $16.4m up 11% on pcp and 52% on prior half; Sales of $24.3 million associated with consumables and service up 59% on pcp and 22% in prior half; Operating profit before tax of $11.0m up 195% on pcp and 493% on prior half;  Cash balance up $1.8m to $71.3m; Distribution agreement with GE Healthcare expanded to include Denmark, Finland, Spain and Portugal; Preliminary clinical study in Japan demonstrates over 90% of probes studied contaminated; New product development program progressing well; Three senior executives appointed to leadership team (February 2019) to support growth strategy.
  • G8 Education (GEM) – Underlying CY18 EBIT of $136.3m, in line with management guidance,  albeit below last year; Average CY18 occupancy down 1.9%pts to 74.0% on a like‐for‐like basis, but higher seasonal growth rates  in CY18 H2 resulted in occupancy ending the year above the prior corresponding period; Signs of moderating child care centre supply growth, including evidence of a downward trend in industry growth rates in CY18 Q4, however, prevailing conditions remain challenging. Dividend 8cps. Outlook – CY19 YTD has had an encouraging start with occupancy growth of circa 2% YTD above PCP; and wages in line with expectations and ahead of last year. Quality and capability are continuing to improve, and our initiatives are tracking to plan. Incremental earnings  from  prior  year  acquisitions  are  expected  to  be  approximately  $10m  in  CY19.  The investment costs associated with the ramp up of CY19 greenfield centres is likely to be $2m in CY19.  The CY19 result will be affected by the cessation of annual license fee revenue of $4m following the mutually agreed termination  of  the  broker  exclusivity  agreement. It is  expected  that  this  will  be  absorbed  by  the improved YoY wage performance. In summary, the new year has started encouragingly but it is still early days. The Group looks forwards to providing a further update on trading performance at the AGM.

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LAST WEEK

Base metals and oil a highlight. Bonds higher (yields down). Local market outperforms, Staples (-3.34%) the only sector lower over the week. COL (-8.5%) & WOW (-4.6%) worst of Top 20. Big caps outperform. Cons Disc (+3.92%), Banks (+3.42%), Financials (+2.96%), Resources (+1.73%) all had good weeks.

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RESULTS SEASON SCORECARDm4

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