The final day of the June 30 reporting period revealed a mixed bag of financial results, with some of Australia's major companies, including Harvey Norman, TPG, Ramsay Health Care, and Downer EDI, delivering varied outcomes amidst a challenging economic environment.
Harvey Norman Faces Earnings Slide
Topping the list of reporters was electronics retailer Harvey Norman, which reported a sharp decline in earnings for the 2023-24 financial year. Unlike rival JB Hi-Fi, which surprised the market with better-than-expected results, Harvey Norman experienced a significant drop in its financial performance.
The company’s net profit after tax plummeted by 34.7% to $352.5 million, with aggregate sales revenue falling by 3.6% to $8.86 billion. Earnings before interest and taxes (EBIT) also saw a substantial decline of 24.8% to $652.7 million. Consequently, the total payout for the year was slashed by more than 10%, reducing the dividend to 22 cents per share, down from 25 cents the previous year.
This result was anticipated, as Harvey Norman had been hinting at a weaker performance throughout the year. Despite a 45% drop in after-tax earnings for the December half, the full-year decline narrowed somewhat, indicating a slight recovery in the second half.
Looking ahead, Harvey Norman's sales data for July 2024 showed a mixed performance across markets. While comparable store sales in Australia rose by 3.3%, Slovenia and Croatia saw a 7.1% increase. However, most other markets reported a year-on-year decline. The company attributed its weaker performance to ongoing challenges in the discretionary retail sector. Despite this, Harvey Norman chair Gerry Harvey reassured stakeholders about the company’s low net debt to equity ratio of 14.49%, ensuring its capacity to access additional liquidity if necessary.
TPG Telecom Announces Job Cuts Amid Weak Profit
Telecommunications giant TPG Telecom also reported a challenging six months to June, marked by weak financial performance and a series of cost-cutting measures. The company, which operates the Vodafone and TPG networks in Australia, revealed a 40% drop in net profit to $29 million, despite a 3.5% increase in statutory EBITDA to $974 million and marginal revenue growth to $2.37 billion.
TPG announced the elimination of 120 jobs as part of its efforts to offset the impact of sustained inflation and deliver a flatter operating cost profile heading into FY25. The company maintained its interim dividend at 9 cents per share but cautioned that future dividends would rely on its ability to generate profits and pay taxes, as it had exhausted its historical franking credits.
Mobile service revenue rose by 7.2% to $1.12 billion, helping to counterbalance a 3.5% decline in fixed service revenue due to heightened competition in the NBN market. Despite the challenges, TPG reaffirmed its earnings guidance range for FY24, projecting earnings between $1.95 billion and $2.03 billion.
Ramsay Health Care Boosts Dividend Following Malaysian Business Sale
Ramsay Health Care delivered a more positive report, with the company announcing a higher dividend for the year to June following the sale of its Malaysian private hospital business. The company confirmed a full-year payout of 80 cents per share, up from 75 cents, after directors increased the final dividend to 40 cents per share.
Ramsay's revenue grew by 7% to $16.66 billion, and the company reported a statutory profit of $888.7 million, a 200% increase from $298.1 million the previous year. However, net profit from operations fell nearly 20% to $263.3 million, reflecting ongoing challenges in the healthcare sector.
CEO Craig McNally warned that while patient activity is expected to grow in FY25, the pace of growth will likely be slower than in FY24. He highlighted the ongoing gap between wage inflation and tariff indexation, particularly in the UK and Europe, as a key challenge. Despite these headwinds, Ramsay remains optimistic about its future prospects, citing growth in hospital admissions and primary health activity across its operations.
Downer EDI Returns to Profit, But Misses Expectations
Services company Downer EDI reported a return to profit for the year to June, but the outcome fell short of analysts’ expectations. The company posted a net profit after tax of $82.1 million, a significant turnaround from a loss of $385.7 million in the previous year. However, this result was well below the average profit forecast of $187 million.
Downer’s revenue declined by 5.2% year-on-year to $12 billion, while EBITA improved from a loss of $227.3 million in FY23 to $203.6 million. The company declared a final dividend of 8 cents per share, taking the full-year payout to 14 cents, up from 13 cents.
Despite the challenges, Downer’s directors described the June 30 outcome as a "pleasing result" in a "challenging operating environment." The company reaffirmed its EBITA margin target of more than 4.5% for FY25, highlighting the progress made in its turnaround efforts and the improvements in all key financial metrics.
In summary, the final day of the June 30 reporting period showcased the diverse challenges and strategies of Australian companies across various sectors, reflecting the complex economic landscape in which they operate.
