Reporting season 2022: Westpac’s major shake up and Nick Scali’s dip

Posted: 3 February 2022 10:45 am
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Reporting season is underway with investors gaining a snapshot of how businesses are actually performing.

Reporting season heated up today with the first of the major banks, Westpac, announcing its half-yearly results.

But perhaps the star of the show was financial group Pinnacle Investment, whose profits grew by 32%.

On the negative side, following a bumper 2021, Nick Scali furniture sales fell.

Westpac

The Big Four bank announced another strong quarter, with cash earnings of $1.58 billion, up 1% excluding notable items.

However, net interest margins for the bank fell by 8 basis points to 1.91%.

In its statement to the ASX, Westpac also notes that it has increased its provision overlays to $118 million as the uncertain fallout from the COVID-19 pandemic continues.

Westpac CFO Michael Rowland said: "We have made a sound start to the year and we are seeing the cost benefits of our simplification programs. The environment however remains highly competitive, and we continue to see pressure on margins."

"Given this, we are bringing forward our simplification plans and changing our operating structure to improve efficiency and move more of our people closer to the customers they support."

As part of changes to simplify the bank, improve accountability and reduce costs, Westpac told shareholders that it is changing its executive team.

The bank's chief risk officer David Stephen, and head of financial crimes and compliance Les Vance will leave, with the position becoming one job and filled by Fannie Mae in New York.

Westpac shares fell 0.24% to $20.55 when the market opened.

Pinnacle

Arguably the strongest announcement of the day was Pinnacle Investment group.

Its net profit after tax was up 32% over the half year ending 31 December, and is now $40.1 million.

Basic earnings-per-share is up 23% from 17.5 cents to 21.5 cents. The company will pay shareholders a fully franked interim dividend per share of 17.5 cents, up 50% from 1H FY21.

But the company is not without risk moving forward.

Pinnacle, which owns and helps with support for 16 investment funds, profits were up but so were net outflows.

Despite retail achieving a record FUM increase of $2.9 billion, Pinnacle experienced net outflows of $1.7 billion over the half, although the company states that it "reflects short-term factors including rebalancing".

"We have continually reminded investors that net institutional flows are 'lumpy' and volatile over reasonably short periods of time, and this was particularly evident during this half-year period," the ASX statement reads.

"There remains strong inherent operating leverage within the group, notwithstanding continuing substantial 'Horizon 2' investment, both within Affiliates and in Pinnacle."

Investors responded positively to the news, with the share price up 5.41% to $12.36.

Nick Scali

Following a bumper couple of years for online furniture sales, Nick Scali's half yearly profits fell.

Results ending 31 December showed the impact of COVID-19 as the company battled supply chain issues.

As such, it has reported revenue of $180.3 million for the first half, which is up 5.4% on the last year. Nick Scali now has an underlying net profit after tax of $35.6 million compared with $38.1 million in the first half of 2021.

Investors in the company will receive a fully franked interim dividend of 35 cents per share.

In terms of future growth, Nick Scali points to its November acquisition of Plush, while also pointing to its new store opening in Hastings, which is the first for the group in regional New Zealand.

Investors largely did not respond to the announcement, with shares slightly down 0.1% at $14.38.

Cettire

Luxury online retailer Cettire was another strong result on the ASX.

The company reports that it beat its FY21 results, "building on the foundations in place over the last 12 months."

The company excelled in web traffic, which was up 304% on last year, active customers and gross revenue which grew by 154%.

However, the company's net profit after tax remains negative $8,299,000.

Commenting on the company's H1 FY22 results, Cettire's founder, CEO and executive director, Dean Mintz, said: "A lot of the themes from our FY21 results continued in the first half of FY22.

"Cettire again grew very rapidly, substantially increasing unique visitors and active customers, further increasing the proportion of revenues from repeat customers, and overall continuing its growth trajectory," he said.

The CEO points to a bright future with a high level of customer engagement, scalability and a high cash generating business model underpinning future growth.

At the opening, shares were down 5.3% to $2.86 at the time of writing.

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