ASX reporting season reveals some upside surprises

As week 2 of ASX reporting season rolls on we are starting to see the impact of the COVID-19 pandemic in results. Nonetheless there have been some upside surprises in the retail sector, largely driven by the shift in consumer spending. We take a look at reporting season so far. 

Insurers doing it tough

FY20 has been a tough one for insurers, with the double whammy of COVID-19 and summer bushfires. Insurance Australia Group Ltd (ASX: IAG) saw profits fall 60% compared to FY19 due to natural perils and investment market volatility. Although gross written premium growth of 1.1% was in line with guidance, no final dividend was declared. Negative cash earnings of over $100 million in the second half mean the 10 cent interim dividend paid in March 2020 equated to nearly 83% of FY20 cash earnings. This was in excess of IAG’s full year payout policy of 60–80% cash earnings. 

Genworth Mortgage Insurance Australia Ltd (ASX: GMA) reported a statutory loss of $90 million in 1H20. COVID-19 impacts including write-downs and loss reserves drove the result, which compared to an $88.2 million profit in 1H19. While Genworth delivered high volume in its core lenders mortgage insurance business, net claims incurred increased to $101.1 million reflecting additional COVID-19 loss reserving. 

Retailers surprise on upside 

Despite the impact of store closures and the economic downturn, ASX retailers have performed strongly so far. Nick Scali Limited (ASX: NCK) reported net profits of $42.1 million, above recent guidance and on par with the previous year despite the impacts of store closures. Revenue loss from the store closures is estimated to be approximately $9 million to $11 million, with full year revenue of $262.5 million. But once stores reopened, sales surged, with May and June sales orders up by 72% year on year. 

Adairs Ltd (ASX: ADH) also saw strong sales. The omni-channel homewares retailer reported a 12.9% increase in group sales for FY20 despite the impact of store closures. Online sales accounted for 31.9% of the total $388.9 million. Online furniture subsidiary Mocka performed ahead of expectation with sales growth of 50.2%. The retailer has reduced net debt to $1 million and declared a final dividend of 11 cents per share. This represents 72% of underlying net profit after tax for 2H FY20. 

Who else is reporting? 

There are a host of ASX companies due to report in coming days and weeks. This week we’ll hear from Commonwealth Bank of Australia (ASX: CBA), Breville Group Ltd (ASX: BRG) and Newcrest Mining Ltd (ASX: NCM), amongst others. Next week, JB Hi Fi Limited (ASX: JBH), Kogan.com Ltd (ASX: KGN) and Altium Ltd (ASX: ALU) will reveal their results.