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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. 

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Kate O'Brien owns shares of Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Altium. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. 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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Kate O'Brien