Tuesday 22 August 2017 by FIIG Research Company updates

Company updates – Axsesstoday, BHP, Bluescope, Fortescue Metals, Genworth, NRW, Sydney Airport, Telstra and Transocean

This week, NRW Holdings acquires Golding, Genworth US 2Q17 review, Petrobras 2026 bond Factsheet, Transocean buys backlog in Songa deal and FY17 results for Axsesstoday, BHP, Bluescope, Fortescue Metals, Sydney Airport and Telstra

Axsesstoday Group – FY17 results

On 17 August 2017, Axsess released its full year results for 2017.

Key points:

  • FY17 NPAT AUD3.6m (compared to our conservative base forecast of AUD2.6m)
  • FY18 NPAT guidance of AUD6m (compared to our current forecast of AUD7m)
  • The loan book continued to grow adding AUD7m since we reviewed the company in March as part of the last raising (to AUD167m)
  • Arrears greater than 30 days have reduced from 1.5% as at April to 1.1% at June 2017
  • Total credit losses in FY17 remained stable at 1.13% of net receivables (~1% FY16)
  • General provisioning for impairments increased from AUD1m (Dec 16) to AUD2m (June 17) as part of the group’s 2.5% general provision for losses

The link to Axsess’ results announcement is available here.External link - opens in a new window 

BHP Billiton Limited – FY17 results

On 22 August 2017, BHP released its full year results for 2017.

Key points

  • Underlying EBITDA increased 64% at USD20.3bn per corresponding period (pcp) – primarily attributable to higher commodity prices – and recorded margins of 55% compared to 41% pcp
  • Underlying attributable profit increased materially by 454% pcp to USD6.7bn, which excludes an exceptional loss of USD842m (after tax). Exceptional loss for FY17 relates to the Samarco dam failure, Escondida industrial action and Chilean withholding tax paid at a concessional rate, partially offset by the reimbursement received on cancellation of the Caroona exploration licence
  • All of BHP’s business segments reported positive underlying EBITDA as shown in Figure 1 below, in particular the coal segment which was driven by higher coal prices:

For more information, see this link here.External link - opens in a new window 

BlueScope – FY17 results

On 21 August 2017, BlueScope released its full year results for 2017.

Key points:

  • FY17 revenue rose 17% to AUD10.8bn from AUD9.2bn per corresponding period (pcp). Underlying EBITDA increased by 54% pcp to AUD1.5bn, and underlying EBIT also increased by of 89% pcp to AUD1.1bn. The significant increase in underlying EBIT was a result of productivity and cost improvements, sales growth, improved steel spreads and the full benefit of the North Star acquisition
  • All of the group’s business segments reported stronger underlying EBIT results, including the New Zealand & Pacific Steel business’ turnaround by AUD101m to AUD61m, a reversal from the prior period’s negative AUD40m EBIT
  • Bluescope’s FY17 Australian energy costs increased by 25% pcp for both electricity (AUD74m) and gas (AUD30m). However, the company has warned that it expects its FY18 Australian electricity costs to increase by 53% pcp to AUD113m (or 93% compared to FY16). The company also expects its Australian gas costs to increase, although at a much lower level than electricity cost increases, by 7% pcp to AUD32m (or 33% compared to FY16)

Other relevant news:

  • MD/CEO stepping down after 10 years; replaced by the head of the company's Australian arm, Mark Vassella

​​For more information, see the link here.External link - opens in a new window 

Fortescue Metals Group Ltd – FY17 results

Fortescue Metals released its full year 2017 results on 21 August 2017.

Key points:

  • FMG’s FY17 key financial results were generally within Bloomberg consensus estimates. Revenue at USD8.5bn was 19% higher per corresponding period (pcp) and underlying EBITDA was 48% higher pcp at USD4.7bn. The material improvements were primarily underpinned by an increase of 35% pcp in average iron ore prices during the year to USD69.53 per dry metric tonnes, and the company’s ongoing improvement in productivity and efficiency which resulted in C1 costs reduced by 17% pcp to USD12.82 per wet metric tonne (wmt)
  • Free cash flow from operations increased by 65% pcp to USD3.5bn, reflecting positive cash margins due to higher iron ore prices and lower costs partially offset by an increase in capital expenditure by 136% to USD0.7bn
  • The group’s net debt reduced by half to USD2.6bn as at 30 June 2017 (USD5.2bn at 30 June 2016), resulting in net gearing improving to 21% pcp from 38%. Fortescue’s nearest term maturity is in 2020 when USD2.16bn of its senior secured notes are due to mature. The group also has a USD525m revolving credit facility of liquidity available as at 28 July 2017

For more information, see the link here.External link - opens in a new window 

Genworth US Mortgage Insurance review 2Q17

Key points:

  • Genworth’s US Mortgage Insurance (US MI) operation continues to demonstrate stable and steadily growing earnings
  • The segment benefited from a USD10m favourable reserve adjustment and an unusually low loss ratio
  • The delinquency rate continues to improve and fell to 2.89% in 2Q17 as compared to 3.27% last quarter and 3.86% a year ago
  • The book value of US MI continues to steadily increase as do the valuations for mortgage insurers

NRW acquires Golding

On 14 August 2017, NRW Holdings Limited announced it will acquire Golding Group Pty Ltd, a civil infrastructure, urban and mining services company operating in Queensland and New South Wales for AUD85m.

The link to our full commentary is available here.External link - opens in a new window 

Petrobras Global Finance

We have provided a 2026 factsheet for Petrobras Global Finance.

The factsheet is available here.External link - opens in a new window

Sydney Airport – FY17 results

On 22 August 2017, Sydney Airport released its full year results for 2017.

Key points:

  • Total revenue was up 7.9% per corresponding period (pcp) to AUD710.5m, mostly attributable to international passenger growth of 7.7%, yield improvements in passenger related business segments of aeronautical (+8% pcp) and retail (+14.3% pcp), and returns on capital investment in aviation infrastructure
  • Although the total number of passengers grew by 3.6% to 21m passengers during 1H17, this figure was lower than the 6.5% growth achieved pcp. During 1H17, international passengers continue to record high single digit growth – albeit at a slower rate of 7.7% (compared to 8.9% in 1H16). Inbound international passengers grew 10% pcp, with strong growth from all regions particularly Middle East and Asia. On the other hand, passenger growth in the domestic business remain subdued and slowed to 1.3% compared to 5.3% pcp
  • Notwithstanding higher operating expenses of AUD136.6m (+8.7% pcp) – mainly driven by an increase of 21.9% pcp in higher electricity contract costs – EBITDA (excluding Western Sydney Airport project costs expensed) increased 7.7% pcp to AUD577.6m

For more information, see this link here.External link - opens in a new window 

Telstra Corporation Ltd – FY17 results

On 17 August 2017, Telsta released its full year results for 2017.

Key points:

  • Total reported income increased by 4.3% to AUD28.2bn
  • NPAT for continuing operations increased by 1.1% to AUD3.9bn
  • Mobile service revenue growth up 0.7% in second half, EBITDA margin 43%, churn reduced
  • NAS income growth of 30.6% with 3pp improvement in EBITDA margin
  • Underlying core fixed costs declined 3.5%, or AUD244m
  • Strategic net promotor score (NPS) up 6 points over last 6 months (flat compared to June 2016) and episode NPS up 2 points over last 6 months (up 3 points compared to June 2016)
  • Strong customer growth across key segments:
    • Domestic retail mobile up 218,000 including 169,000 postpaid handheld
    • Domestic retail fixed broadband up 132,000
    • Retail bundles up 224,000 (88% of fixed data customer base)

The link to Telstra’s results announcement is available here.External link - opens in a new window 

Transocean buys backlog in Songa deal

On 15 August 2017, Transocean (RIG; Caa1/B+), one of the world’s largest drilling rig operators, announced its agreement to buy Norwegian competitor Songa Offshore (SONG.OL) for USD1.1bn.

The acquisition is a voluntary exchange offer to acquire 100 per cent of the issued and outstanding shares of Songa and will be funded with USD540m of RIG equity, a newly issued USD660m convertible bond, USD480m of cash, and the assumption of USD1.7bn of net debt. The deal increases contracted backlog by USD4.1bn, to a combined total of USD14.3bn.

The link to the Transocean acquisition announcement is available here.External link - opens in a new window