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Aurizon share price on watch after solid profit and dividend growth in FY 2020

The Aurizon Holdings Ltd (ASX: AZJ) share price will be on watch on Monday after the release of the rail freight operator’s full year results.

How did Aurizon perform in FY 2020?

For the 12 months ended 30 June 2020, Aurizon delivered a 5% increase in total revenue to $3,064.6 million. This was driven largely by a strong performance by its Bulk business during the financial year.

The Bulk business posted a 21% increase in revenue to $608.8 million and a 102% lift in earnings before interest, tax, depreciation, and amortisation (EBITDA) to $110.1 million. This ultimately led to Aurizon reporting a 7% increase in total EBITDA to $1,467.6 million for FY 2020.

On the bottom line, the company posted a 12% increase in underlying net profit after tax to $531 million and a 28% lift in statutory net profit after tax to $605 million. The latter includes the profit on sale of Aurizon’s Rail Grinding business.

Underlying earnings per share came in 15% higher at 27.2 cents, which allowed the Aurizon board to increase its full year dividend by the same margin. The company’s final dividend will be 13.7 cents per share, which lifts its full year dividend to 27.4 cents. This dividend will be 70% franked and represents 100% of its underlying earnings for the fifth year in a row.

In addition to its dividend, Aurizon will be returning funds to shareholders via buybacks. After buying back $400 million of shares in FY 2020, it will push ahead with a new $300 million on market share buyback during the current financial year.

“No material impact as a result of the pandemic.”

Aurizon’s Managing Director and CEO, Andrew Harding, revealed that the company’s operations have not been impacted meaningfully by the pandemic.

He commented: “Despite the emergence of COVID-19 in the second half of FY2020, the Company has delivered a solid operational and financial performance with no material impact as a result of the pandemic.”

“I am proud of the outstanding efforts of our employees during this very challenging time. As an essential transport provider to the Australian economy we have provided safe, reliable services to our customers and continued to support regional communities where our people live and work,” he added.

Outlook.

Aurizon is expecting its FY 2021 underlying EBIT to be in the range of $830 million to $880 million, representing a year on year decline of 3.2% to 8.7%.

This assumes flat volumes in the Coal business of 210-200mt, based on the current view of COVID-19 impact on steel demand. It also assumes a QCA-approved volume increase of 5% to 239 million tonnes, lower CQCN volumes due to COVID-19’s impact on coal demand, operational efficiency improvements, and redundancy costs.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Aurizon Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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