Contrasting market reactions yesterday to two annual results from mid-level industrial companies.
Firstly the market didn’t like the result from UGL, despite the upbeat commentary from directors and CEO, Richard Leupen.
UGL increased full year profit by 9.7% in the year to June 30 and the train manufacturer and engineering services provider said the 2012 financial year would be a positive growth year.
Net profit rose to $158.51 million for the 12 months to June 30 from $144.55 million a year earlier, Sydney-based UGL said in a statement.
That was on a 2.4% rise in revenue to $4.29 billion.
The company declared a final dividend of 38c a share making the total for the year a record 70c, up from 2010’s 64c a share.
But that didn’t win the company any fans among investors yesterday and the shares fell 24c or 1.9% to $12.26.
The trading range tells us something, the shares opened at $12.71, hit a high of $12.80, and then fell sharply to a low of $12.06, before recovering slowly in the stronger afternoon session.
The opening quote was up 21c from last Friday’s close as investors took a positive message from a first glance at the results, which were issued before trading opened.
The subsequent fall tells has that a more detailed examination of the figures caused a rethink, in a market that saw a 2.6% rise overall.
Perhaps it was the rather vague outlook for the coming year when UGL said it expected full year 2012 to be a "positive growth year," but declined to offer specific guidance.
"Given recent economic developments throughout the world, UGL believes at this stage it is prudent that we do not give specific guidance until such time that the company can assess the impact of these developments," UGL’s chief executive Richard Leupen said in yesterday’s statement.
He said the company would continue its growth strategy of securing projects on acceptable commercial terms and maintaining the quality of its order book while focusing on obtaining long-term services contracts and construction and rail manufacturing projects.
The company was always assessing potential acquisitions but it would only pursue opportunities that made a "positive contribution" to shareholders in the short to medium term and build on the revenue base.
"UGL is in good shape," Mr Leupen said.
"With an excellent talent pool, a solid balance sheet which sets us apart, a growing international footprint, and an enviable blue-chip customer base, we again expect to deliver positive returns for our shareholders."
The company said its order book remains at $8.2 billion, with more than 73% of the order book made up of long-term recurring maintenance style contracts.
The market was clearly looking for more.
But for Ansell, the latex products group, the market was far more receptive.
In fact the shares were in demand from the opening and closed up 4.1%, or 45c at $13.68.
A look at their trading range shows a big difference to UGL’s reception. Ansell shares opened higher and jumped to a high of $13.98, then eased to hit a low of $13.54, which was still 40c higher (3%) than last Friday’s close.
Ansell said did OK in the year to June 30, coping with big rises and falls in the prices of its key raw materials, rubber and cotton, but reckons it will do a lot better in the current financial year.
But the big attraction for the market was probably another share buyback of up to five million shares over the next year, on top of a previous buyback.
It will be an "opportunistic" buyback in that the company will buy its shares on price dips.
Dividend was also boosted with the final of 19c a share, up from the 17.5c for the last half of the 2010 year. Total payout for the year was 33c a share up 8%.
So all in all, capital management, a higher dividend and a forecast of higher earnings, a good recipe in the current, questioning market atmosphere.
Ansell reported a 2.7% rise in net earnings, but forecast a 12% rise in the 2011-12 year.
The rubber gloves and condom maker forecast said net profit rose to $122.7 million for the 12 months to June 30 from $119.4 million a year earlier.
That was on a 0.6% dip in revenues to $1.228 billion.
The company said earnings per share rose 15% to 91.6 US cents and forecast that would increase to between 97 and 103 US cents in the 2012 financial year.
"This guidance reflects uncertain global economic conditions with subdued growth and FX rates approximately at current levels, the company said yesterday.
Ansell CEO, Magnus Nicolin said in yesterday’s statement that the company had "achieved double digit sales and profit growth during a year, that saw it reorganised into a truly global company with a Business Unit matrix structure, and where manufacturing, sourcing and logistics were combined under one head.
"Ansell faced strong head winds in F’11, due to significant increases in the prices of Natural Rubber Latex (NRL) and cotton, and more recently, utility costs.
"These were offset by higher volumes, price increases and improved efficiencies at all levels.
"Our excellent results reflect the speed with which Ansell has reacted to these cost cha
