Flight Centre plunges to loss, Woolworths profit falls, Afterpay halves loss
The Australian share market has opened slightly higher as reporting season continues, with Flight Centre plunging to a loss as the coronavirus pandemic hits the travel sector.
By 10:30am AEST, the ASX 200 was 0.2 per cent higher at 6,128 points, as gains for the miners offset falls for banks and energy stocks.
Gold miners were among the best performers in early trade, including Perseus Mining (+6.6pc), Northern Star Resources (+4.3pc) and Saracen Minerals (+4.3pc).
The Australian dollar was slightly higher, buying around 72.4 US cents.
Flight Centre plunges to loss on COVID-19 hit
Travel giant Flight Centre has posted a $662 million statutory loss after tax — down from last year’s $264 million profit — due to the hit from COVID-19.
Excluding one-offs, the company’s fall in underlying earnings was even bigger, at $853 million, to a pre-tax loss of $510 million.
Flight Centre shares fell 1.4 per cent to $12.44.
The company said it had recorded a $150 million underlying profit for the eight months to February, but that evaporated in March as the global coronavirus pandemic was declared, before mounting losses in April, May and June pulled the result deep into the red.
In response, the company said it had raised more than $1.1 billion in extra cash and available funds to keep operating, while also slashing its costs.
Flight Centre said it had cut about $1.9 billion in annual costs, leaving its expenses at just 30 per cent of pre-COVID levels.
However, it reported that July revenue was just 7 per cent of pre-pandemic levels at $17 million (excluding refunds).
Last month, the travel agency said $53 million in costs went out the door, but $10 million in JobKeeper payments would reduce that to a monthly loss of $43 million.
As at June 30, the company had received $98 million worth of government subsidies globally.
The company had just under $1.9 billion in cash and equivalents on hand at June 30, and total current assets of $2.44 billion, versus total current liabilities of $1.86 billion.
That suggests it can keep operating at current loss levels for up to a year without raising more funds, depending on its arrangements with lenders.
It also said it could get back to 40 per cent of its pre-COVID business at the current level of staffing and costs, which would enable it to break even as travel gradually resumed, which Flight Centre’s managing director Graham Turner said was occurring in some regions.
“Travel is starting to gradually recover in locations like North America, Europe and South Africa, where domestic borders are now open, although we are also seeing heightened restrictions in Australia and New Zealand, after earlier relaxations,” he said in a statement.
Mr Turner said, despite nearly 40 years in operation, nobody at Flight Centre could have imagined the current circumstances where virtually all international travel had ceased.
“We were forced to make some very tough decisions as this crisis unfolded, but we were very fortunate to be able to draw on our strong balance sheet,” he said.
“We also moved quickly to develop a longer cash and liquidity runway and to lower costs in anticipation of a zero- or very-low-revenue environment for an extended period of time.”
Flight Centre has closed around half of its physical stores globally and sought rent reductions for others.
The company has also stood down or laid off about 70 per cent of its staff, with a 50 per cent reduction in executive and director pay for the fourth quarter and ongoing reductions this financial year.
Woolworths profit falls, Afterpay halves loss
Woolworths’ net profit has fallen 57 per cent, despite the coronavirus pandemic lifting supermarket sales.
The company’s full-year profit fell to $1.16 billion, as the closure of its hotels and pubs due to COVID-19 restrictions offset a strong performance at its supermarkets division.
Comparable supermarket sales rose 8.9 per cent in the fourth quarter, ahead of the 7.1 per cent rise at rival Coles.
“While we have got off to a strong start to fiscal 2021, the outlook for the remainder of the year is very difficult to predict, as evidenced by recent events in Victoria and New Zealand,” Woolworths chief executive Brad Banducci said, referring to the second wave of coronavirus outbreaks.
As the company flagged in June, the bill for its staff underpayment scandal has blown out to $500 million, with $390 million in salaries owed to staff and $110 million in interest and other expenses.
Shareholders will receive a final dividend of 48 cents per share.
Woolworths shares gained 2.1 per cent to $40.11.
Afterpay has posted an annual loss of $19.8 million, improving on last year’s $42.9 million loss.
However, shares rose 1.5 per cent to $92.08, after the buy-now, pay-later provider said it had more than doubled the number of customers over the year, to 9.9 million, and now had more than 55,000 merchants across its network.
Afterpay said it saw rapid expansion in the US and the UK, beating its targets for new customers in those markets.
RBC Capital Markets analyst Tim Piper said the result was slightly better than his forecasts and Afterpay’s recent capital raising should see the company able to drive increased growth over the medium term.
Shares in Afterpay have rocketed higher this year, up 200 per cent since January 1 and more than 900 per cent since its low point in March.
Air New Zealand reported its first annual loss since 2002, and forecast another potential loss next year as the outlook for international travel remained clouded by the pandemic.
The airline posted a net loss of $NZ454 million ($415 million) for the past financial year, as it wrote down the value of its planes.
Costs associated with restructuring the airline, including cutting 4,000 employees or 30 per cent of its workforce, also weighed on the result.
The company’s Australian-listed shares were 1.6 per cent higher in early trade.
Netflix, Salesforce drive tech gains on Wall Street
Overnight, the S&P 500 and the Nasdaq rose to fresh highs, while the Dow Jones made a more modest gain.
Shares in cloud computing firm Salesforce jumped 26 per cent after raising its revenue forecast.
The company’s quarterly results beat estimates, due to rising demand for its online business software, as the coronavirus pandemic hastened the shift to remote working.
Netflix shares rose strongly, closing 11.6 per cent higher following an upbeat analyst report.
Piper Sandler analyst Yung Kim published a survey that found most US Netflix subscribers were willing to accept a price increase, and that more subscribers planned to keep Netflix than other video streaming services after the COVID-19 crisis subsides.
Other tech stocks including Facebook, Amazon and Microsoft also made gains.
“Until we really start to see a worry that interest rates are likely to start to move higher, I still see growth in general, tech and consumer discretionary in particular, holding up very well,” Sam Stovall, chief investment strategist at CFRA in New York, said.
A gauge of global equity markets jumped to an all-time peak — the MSCI index tracking 49 countries rose 0.8 per cent, surpassing the high recorded in February.