Money
Issue No. 26 - December/January 2005/06
Mixed results, by all reports
by Graham Winter
Results for the August 2005 reporting season for the Australian Equity market were, in general, slightly ahead of our expectations – which, in hindsight, was a good result given the potential for earnings disappointment.
Key themes to come out of company reporting included:
- ongoing pressure on profit margins from high raw material prices and labour shortages;
- persistent competitive trading environments for companies exposed to consumer spending;
- and generally vague guidance for profits in fiscal 2006.
South Australian companies reported mixed results. Some of the highlights are discussed below:
Adelaide Bank Limited delivered a Net Profit After Tax broadly in line with our forecasts.
The main positive from the announcement was the confidence expressed in Adelaide Bank’s targets for the next three years:
- more than 10% cash earnings per share growth per annum,
- cost-income ratio of 46% by Financial Year 2007/08, and
- asset quality in the top quartile of Australian banks.
Despite concerns about slowing mortgage growth for banks, Adelaide Bank’s momentum has continued.
In fact, growth relative to its major bank peers has improved, partly due to expansion into the mortgage broker channel.
We remain confident that Adelaide Bank will continue to deliver solid revenue growth through its third-party strategy, despite a continuing strong competitive environment for housing loans.
The recent AGM update painted a picture of continued strong earnings momentum and we believe there remains potential for upside risk to earnings if this momentum continues.
Argo Investments Limited reported an increase in profit of 33.8% on the previous year driven by strong growth in ordinary income and an increase in special distributions.
The company delivered a solid absolute return for the year, gaining 27...
