While the overall market continued its strong start to 2023, the ongoing challenges were on full display in Wednesday’s updates from The Retail Shop, Credit Corp and Nufarm.
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Discount retailer The Reject Shop (ASX: TRS) lost its CEO of six months on Wednesday while also revealing a small improvement in sales and earnings for the six months to December and a reasonable start to the second half of its 2022-23 financial year.
The company said that CEO Phil Bishop had “resigned for personal reasons, effective immediately.”
Chairman, Steven Fisher, said in the statement that “On behalf of the Board and The Reject Shop team, we thank Phil for his work over the past six months and wish him well. A search for a new CEO will commence immediately.”
“The Company and Phil have agreed for Phil to receive payments from the Company equivalent to his six months’ notice period plus any statutory entitlements. Any performance rights held by Phil have been lapsed.
In the meantime, Clinton Cahn, the company’s Chief Financial Officer, has been appointed as Acting CEO and will also continue to fulfil his existing CFO responsibilities during this time.
“Clinton has held the role of CFO since 1 May 2020 and performed the Acting CEO role between April 2022 and July 2022. TRS said he will work closely with Amy Eshuys, Chief Operating Officer, “to ensure the Company’s positive momentum continues, particularly as it relates to its improving merchandise offering.”
TRS said the unaudited half year results would show first half sales to be $439.7 million, up 3.5% on the prior corresponding period. Comparable store sales were up 2.4% on the December, 2021 half year.
Earnings Before interest and Tax (pre AASB-16) for the first half is expected to be in the range of $22.5 million and $23.5 million which would be up around 10% on the $20.5 million in the previous period.
The company said “its balance sheet remains strong with a cash position at 1 January 2023 of approximately $84 million and no drawn debt.”
TRS said it had “generated positive comparable store sales growth during the first four weeks of the second half, noting that sales in the pcp were adversely impacted by the Omicron variant of COVID-19.”
Mr Fisher commented: “The solid preliminary half year result was underpinned by a strong Christmas trading period and we are pleased with the ongoing positive momentum achieved during January. I am confident that the combination of our improving merchandise offering, experienced senior leadership team and strong balance sheet positions the Company well to create value for shareholders by growing comparable store sales and continuing to expand the store network.”
The company’s full half year results will be out later this month.
TRS shares rose 1.7% to $4.17.
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Meanwhile shares of Credit Corp Group (ASX: CCP) sold off yesterday for a while, then recovered to close higher after the company surprised with a 30% slide in 2022-23 first half net profit and a sharp cut in the size of its interim dividend.
The shares were down more than 4% at one stage but rose to close at $22, up 1.6%, on the news of a fall in December half net profit to $31.8 million due to provisioning and US resourcing costs.
Interim payout to shareholders was sliced 40% to 23 cents a share from 38 cents in 2021-22.
The company made it clear in the release that it expects earnings to recover strongly over the second half of the fiscal year and has left its full year net after tax profit guidance intact.
” Loan book growth will moderate over the second half, while the record starting book will drive increased interest revenue. US collections will improve as elevated resourcing is converted into collections. High project costs incurred in the first half will not recur over the balance of the year,” the company said in its Wednesday release to the ASX.
Credit Corp CEO Thomas Beregi said in the statement that loan book growth had been achieved while maintaining credit standards and rationing the volume of longer-duration auto loans.
“Wallet Wizard credit settings remain conservative and short durations coupled with relatively small loan sizes will contain risk should economic conditions deteriorate,” he said.
Strong US purchased debt ledger (PDL) investment reflected growth in purchases under ongoing buying arrangements, or forward flows, as market sale volumes increased towards pre-pandemic levels.
“To service the increased investment, US resourcing expanded significantly during the half including growth across all three US operational sites and offshore resourcing from the Philippines and Australia. Purchasing will reduce over the balance of the year as forward flows expire.
Mr Beregi said that while increased US resourcing was yet to produce a commensurate increase in collections, it placed the Company in a strong position for further growth as PDL supply conditions improved.
“US charge-off volumes are growing and increased resourcing will enable Credit Corp to service recent and future purchases, growing collections and earnings over the medium-term,” he said.
“Investment volumes in the AU/NZ PDL market remain very low, with no signs of a significant recovery in unsecured credit balances and charge-off rates. While Credit Corp maintained a strong share of the diminished market, collections and earnings declined against prior corresponding periods enhanced by one-off secondary purchases, including the Radio Rentals acquisition in FY2022.
“The Collection House agency acquisition completed during the first half is on track to make a positive contribution over the full year after a significant initial cost restructuring. All key clients have been retained and the expanded collection services segment presents an opportunity to enhance client relationships and improve margins through ongoing integration.”
The company paid a total of 74 cents a share in dividends in 2021-22 and there was no assurance yesterday that the 40% cut in the 2022-23 interim would be made up if the forecast rebound in second half earnings occurs.
Directors said the cut in the interim was linked to its policy of paying out 50% of earnings to shareholders who will be cheering for a big second half rebound
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And finally, shareholders in Nufarm (ASX: NUF) were told yesterday that the positive momentum in sales seen in 2021-22 had continued into the early months of the 2023 financial year, enabling the company to confirm guidance for the 2022-23 financial year.
CEO Greg Hunt told the meeting that the first quarter had seen favourable agricultural conditions across the major grain producing regions, “where demand remains strong for both our seed and crop protection products.”
“As a result, assuming normal seasonal conditions, we continue to expect modest underlying EBITDA growth in the 2023 financial year on a constant currency basis,” he told the meeting.
“As we noted when we announced our results in November, we expect full year earnings to be weighted to the first half, but less skewed than what transpired in FY22.
“This should result in a lower underlying EBITDA at the half compared with the prior comparative period. However, as I mentioned we remain confident of delivering modest underlying EBITDA growth at constant currency for the full year.
“I am also pleased to share that we continue to remain on track to meet or exceed our FY26 growth aspiration of $4.6 – 4.8 billion in revenue,” Mr Hunt told the meeting.
“And we are confident of reaching our anticipated plantings for Nuseed Carinata and for delivery of Nuseed Omega-3 oil as announced in December. Our crop protection pipeline remains strong with a number of new product launches planned for this year.”
Nufarm shares slipped 1.8% to $5.81.
