ASX 200 rises 0.8%, A2 Milk sinks, Zip drops

The S&P/ASX 200 Index (ASX:XJO) rose by 0.8% today. The A2 Milk Company Ltd (ASX:A2M) share price sank over 16% after reporting.

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The S&P/ASX 200 Index (ASX: XJO) rose by around 0.8% today to 6,834 points.

Reporting season is nearly over, but there has been a flurry of results today.

Here are some of the highlights:

A2 Milk Company Ltd (ASX: A2M)

The A2 Milk share price dropped 16% today after reporting its FY21 half-year result.

The ASX 200 company revealed that its total revenue was down 16% to NZ$677.4 million and the earnings before interest, tax, depreciation and amortisation (EBITDA) declined 32.2% to NZ$178.5 million. The EBITDA margin dropped to 26.4%.

A2 Milk said that the daigou channel continues to see COVID-19 disruptions, which is causing a flow-on impact to the cross-border e-commerce channel (CBEC). It is taking steps to reactivate these channels.

Infant nutrition revenue in Australia and New Zealand declined 40.5% to $209.5 million in the half.

The infant formula business said that it generated strong performance in the China label infant nutrition division, with revenue growth of 45.2%. This was an increase in the market share value to 2.4%. Its distribution increased to 22,000 Chinese mother and baby stores (MBS) in the period.

Australian liquid milk saw 16.3% revenue growth and a record market share of 11.7%.

USA revenue saw 22.3% growth with distribution rising to 22,300 stores. The company’s agreement with Agrifoods in Canada is seeing steady distribution expansion after starting in Western Canada.

The pace of the recovery is slower than previously expected and it now expects revenue to be at the lower end of the previous guidance range.

Revenue is now expected to be in the order of NZ$1.4 billion and the EBITDA margin is expected to be between 24% to 26%. This outlook assumes actions taken to re-activate the daigou channel are successful and deliver significant improvement quarter on quarter.

Zip Co Ltd (ASX: Z1P)

The Zip share price was another of the worst performers in the ASX 200 after revealing its FY21 half-year report.

Zip revealed that it generated record revenue of $160 million, which was growth of 130% year on year. The revenue growth was made possible thanks to total transaction volume (TTV) growth of 141% year on year to $2.32 billion – this was annualising at $7.5 billion at December 2020.

The buy now, pay later business reported that it made positive cash earnings before tax, depreciation and amortisation (EBTDA), with cash gross profit margins increasing to 54%. It boasted that it is demonstrating market leading unit economics whilst investing for global growth.

Zip said that it now has more than 5.7 million active customers, which was an increase of 217% compared to the prior corresponding period. It also has more than 38,500 merchants across the US, Australia, New Zealand and the UK.

Some of the latest clients that Zip has won include Gamestop, Fanatics, Newegg and Sunglass Hut in the US, as well as Harvey Norman Holdings Limited (ASX: HVN), Domayne and Adore Beauty Group Ltd (ASX: ABY) in Australia.

During the six-month period, a number of investments were made in the buy now, pay later space across Europe and the Middle East. The Canadian project is currently in the pilot stage and scheduled for a soft launch in the second half of FY21.

Afterpay Ltd (ASX: APT)

One ASX 200 business that didn’t see any share price movement was Afterpay.

It went into a trading halt to announce a $1.25 billion convertible notes offering to take up a larger ownership of Afterpay US.

Afterpay also announced its FY21 half-year result.

Its underlying sales went up by 106% to $9.8 billion, driving Afterpay income higher by 108%.

The number of active customers that Afterpay has increased by 80% to 13.1 million and the number of active merchants went up by 73% to 74,700. North American customers grew 80% to more than 8 million.

Afterpay disclosed that its gross loss as a percentage of underlying sales improved from 1% to 0.7%. Its net transaction margin jumped 110% to $213.9 million.

The buy now, pay later business saw underlying EBITDA soar 521% to $47.9 million.

Afterpay finished the period with $460.5 million of cash. It said it had pro forma liquidity and growth capacity of more than $1.7 billion.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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