There has been a rough reaction to some All Ordinaries Index (ASX: XAO) results. One stock has dropped around 20%!
ASX reporting season is like Christmas. It's exciting to unwrap the company report, but sometimes you really didn't want what's inside.
Investor reaction to a result can be as much about expectations as it is about the numbers themselves. For example, if the market is expecting a company to report a 10% profit rise and it only reports a 5% rise then that's seen as disappointing.
Let's briefly look at these three stocks.
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Humm Group Ltd (ASX: HUM)
The Humm Group share price is currently down 24%.
In the ASX All Ords share's FY24 first half result, the financial services and instalment plan company reported that its total receivables rose by 23% to $4.65 billion, with commercial receivables up 39% to $2.7 billion. The 'normalised cash profit after tax' fell 27% to $28.1 million. Higher interest rates meant a bigger interest cost to the business. The commercial finance segment saw normalised cash profit increase 12% to $21.6 million.
The company was pleased to report it had executed another $7.5 million of further cost savings during the FY24 first half, bringing the total savings to $26.1 million since the cost-saving program started in HY23.
Humm reported a statutory net loss after tax of $6 million, compared to a net profit after tax of $7.5 million in HY23.
The business declared a fully franked interim dividend of 0.75 cents per share.
Sims Ltd (ASX: SGM)
The Sims share price is currently down by 9%.
In the FY24 first-half result, the metal recycling business reported that revenue rose 7.4% to $4.1 billion. Statutory earnings before interest and tax (EBIT) rose 0.2% to $163.8 million, but underlying EBIT sank 85.6% to $13.4 million. Statutory NPAT dropped 34.9% to $65.8 million.
The ASX All Ords share blamed the profit decline on lower metal trading margins and inflationary pressures, which was partly offset by "cost control measures". It disclosed that challenging market conditions were felt across all of its metal segments, though there was a varying performance between and within geographic regions.
In terms of the outlook, Sims is confident about the medium-term and long-term. Metal-intensive infrastructure spending continues to drive longer-term demand for scrap metal.
In the short term, the underlying EBIT is expected to improve in the second half of FY24 compared to the first half, including $25 million of cost reduction initiatives.
Sims said initiatives have been started to increase both domestic sales channels and unprocessed material in the USA. Demand for scrap metal in the USA is "expected to remain robust, supporting prices."
Baby Bunting Group Ltd (ASX: BBN)
The Baby Bunting share price is down 13%.
It reported in the FY24 first-half result that total sales dropped 2.5% to $248.5 million. The gross profit margin was flat, while the underlying cost of doing business (CODB) increased to 32.9% (up from 32.4%). New store running costs and higher wage costs led to the CODB worsening.
Statutory net profit after tax was flat at $2.7 million, the underlying net profit dropped 31% to $3.5 million. The interim dividend per share was cut by 33% to 1.8 cents.
Baby Bunting pointed to challenging economic conditions, though it saw an improvement in winning new customers, and it was disciplined with its inventory management. The ASX All Ords share said cost control delivered a "significant" year-over-year improvement with operating cash flow.
In terms of the trading update, between Boxing Day to 16 February 2024, total sales were down 1.4%, and online sales increased 14%. The rate of new customer acquisition was up 3.4%.
It said living pressures are still affecting customers and this is "unlikely to abate in the short-term with economising likely to continue."
