BHP’s shareholders large and small look like getting a Christmas present by the end of this year with the company close to confirming how it will return most of the billions to be received from the sale of its US onshore oil and gas assets.
BHP chief financial officer Peter Beaven told shareholders in an online briefing on Friday that they will know by the end of October how the money will be returned.
“We should be able to complete [the transactions] by the 31st of October, that’s the plan and that’s going well. And so what we then need to do is get the cash in the bank at that point, and get it back, hopefully by the end of this calendar year,” Mr Beaven told the briefing.
Mr Beaven said BHP had not decided how the net proceeds would be returned to shareholders, adding that it could be “in the form of more cash dividends, or in the form of buybacks” of its Australian or London-listed shares.
BHP has sold its US onshore assets for a total of $US10.8 billion with most going to a subsidiary of BP for $US10.5 billion. BHP said it would get half of the consideration when the deal was completed, with the balance to come in six equal instalments over six months.
Even after the return of capital Mr Beaven said shareholders can expect BHP to keep a “conservative, strong balance sheet”.
He also said BHP was committed to its conventional oil and gas business, which included “great assets” that generated strong returns.
That is a repudiation of the pressure of US hedge fund shark, Elliott for BHP to sell all its oil and gas assets, including the long held in the US Gulf of Mexico, in Trinidad and in Australia.
Meanwhile Melbourne-based plumbing group Reece Limited has delivered on its promise of a record full-year result, lifting profit 6.1% to $225 million. Profit for the 12 months to June 30 rose from $212 million a year ago as revenue rose 10.7% to a record $2.69 billion following the addition of 28 new stores, 16 through the acquisition of Viadux in Australia and Heatcraft New Zealand.
Reece is also expanding into the United States with a $1.9 billion ($US1.44bn) deal to buy US plumbing distributor Morsco, but that deal completed in July after the close of the last financial year.
That means the benefits won’t start emerging until the interim next March.
Earnings before interest, tax, depreciation and amortisation rose 5.4% to $378 million.
The company declared a fully-franked final dividend of 14.25 cents a share, taking the total dividend for 2017-18 to 20.25 cents a share.
Reece paid $1.9 billion for Morsoco and its $2.3 billion in sales across the US southwest.
Reece shares rose 3% to $12.57 on Friday and are up more than 30% for the year to date.
It was a very different story from retailer Harvey Norman’s which revealed full-year profit slumped 16.4% to $375.4 million due to lower property revaluations and a failed and costly dalliance in dairy farming in Victoria.
The lower profit and losses saw the company surprise investors with a quick fire $163.9 million fund raising from shareholders in a one for 17 renounceable issue.
The issue is aimed at cutting debt and the $2.50 a share offer price (a 33% discount from Thursday’s close) tells us something about the urgency of the need for the new capital at the company.
Harvey Norman shares fell 4.5% to $3.60 on Friday, taking the loss for 2018 so far to more than 13%.
Sales revenue for the year ending June 30 rose 8.8% to $1.99 billion, but property revaluation more than halved to $51.7 million and losses from the firm’s Coomboona dairy farm investment hit $49.5 million (and could be repeated this financial year).
Harvey Norman paid $34 million for a 49.9% stake in Coomboona in September 2015, on the recommendation of founder and chairman Gerry Harvey. The Victorian venture went into receivership in March.
After stripping out property revaluations and losses from the dairy business, profit was flat at $532.5 million.
Harvey Norman’s 195 domestic franchisee-owned stores saw comparable sales revenue up 2.2% cent to $5.7 billion.
Chairman Gerry Harvey said he was particularly pleased with growth overseas.
The offshore division, which consists of 89 stores in seven countries, accounted for 22% of the company’s consolidated profit.
There are 39 Harvey Norman stores in New Zealand, 16 in Malaysia, and 13 each in Ireland and Singapore.
It is also present in Slovenia, Northern Ireland, and Croatia.
“We fully intend to capitalise on this excellent performance overseas, and plan to invest substantially in growing our offshore Harvey Norman store network, particularly in south east Asia,” Mr Harvey said in a statement on Friday.
“We are actively exploring new sites, and there is an expectation to open up to 18 new Harvey Norman company-operated stores overseas within the next two years.”
Harvey Norman will pay a fully franked final dividend of 18 cents a share, up from 12 cents a year earlier.
That’s a total of 30 cents a share against 26 cents for 2016-17. The interim for 2017-18 was cut to 12 cents a share from 14 cents previously.
And red ink everywhere at Retail Food Group after the Gloria Jean’s and Donut King operator slumped to a $306.7 million loss for the year to June.
Retail Food Group, whose shares this month hit an all-time low as it tries to clean up following accusations it was badly treating franchisees and staff, says it will step up the closure of non-performing stores in its various chains, which also involve Crust Pizza and Brumby’s Bakery.
RFG it says it is aiming to close 250 domestic stores – up from the previously announced 200 – by the end of the 2018-19 financial year.
Despite a 7.1% rise in revenue for the year to June 30, the company was forced to make $402.9 million in impairments and provisions to cover store closures, restructuring and a reduction in the value of its brands and assets.
Shares in the company fell by as much as 12% following the release of its results on Friday before closing down 8.8% at 57 cents. That wiped out the gain to Thursday, but still left the shares up more than 35% in August.
However, they remain down 77% year to date and hit al all time low of 39.5 cents a fortnight ago before staging a rather noticeable recovery which was not supported by the result on Friday.
Now they are at the mercy of their bankers who have brought forward to 2019 (from 2020) the date when the company’s debt has to be settled. Retail Food Group revealed on Friday it had struck a new deal with its bankers with some tightened conditions in the wake of the impairments which totalled $403 million (from $138 million at December 31.
“Despite the program to restructure the franchise businesses and build confidence in the franchise brands by consumers and potential franchise investors, there remains significant risk that the group may breach financial covenant thresholds under its financing agreements within the next 12 months,” the company directors said in its full-year report released on Friday.
“A breach of one or more of these financial covenants may result in all the syndicated debt becoming due and payable,” directors warned In March, RFG posted an $87.8 million first-half loss, fuelled by $138 million in writedowns and provisions for the closure of up to 200 stores.
RFG has more than 2,400 outlets across Australia and internationally, and employs about 15,000 employees. Those numbers are shrinking by the week.
