Another day, another set of good results delivered this reporting season
Reporting season is the gift that keeps on giving. Following on from our reporting of the great results from online retailers Cettire (ASX:CTT) and Temple & Webster (ASX:TPW), results from several other holdings are also encouraging. Seven Group (ASX:SVW), IDP Education (ASX:IEL), and Audinate (ASX:AD8) have all reported, and the initial response from the market has been positive.
Audinate (ASX:AD8)
Audinate is a technology and hardware company in the audio-visual (AV) space. Think of a large concert or conference. AV systems traditionally require point-to-point physical connections between devices, resulting in cumbersome amounts of specialised, single-purpose cables (think HDMI and 6mm copper cables, for example) that define where audio and video signals can go. Changes are labour-intensive and expensive. Audinate’s solution is to replace all those connections with a computer network, effortlessly sending video or hundreds of audio channels over slender Ethernet cables with perfect digital fidelity.
Audinate’s share price is up more than 25 per cent in the last five days (as of 14 February 2024), a period that includes the release of its half-yearly results, which included just about everything except an upgrade. Their first half of FY24 revenue jumped 51 per cent to $47 million, exceeding consensus estimates by about six per cent. Adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $12 million tripled the previous corresponding periods by $4 million and exceeded some analysts’ forecasts by 20 per cent.
The company entered the current financial year with an elevated sales backlog. The reduction in that backlog reported by the company suggests its original equipment manufacturers (OEMs) are confident in the company’s ability to fulfil orders in a timely fashion and manage its supply chain. All metrics, including revenue, gross profit, free cash flow and net debt, exceeded expectations. Management has a reputation for under promising and over-delivering, so their outlook statements were predictably conservative.
Seven Group (ASX:SVW)
Seven Group reported a very strong result. Group revenue for the first half was up 17 per cent to $5.4 billion and seven per cent ahead of consensus. Group earnings before interest and taxes (EBIT) were up 28 per cent to $764 million and 21 per cent ahead of consensus. The WesTrac business was 25 per cent ahead of consensus. Operating cash conversion was 70 per cent compared to 68 per cent in the first half of 2023. The company upgraded guidance to EBIT for the entire year from high single-digit-to-low teen growth to “mid to high-teen growth”. The market was forecasting 13 per cent growth.
IDP Education (ASX:IEL)
Finally, with its share price up 17 per cent in the last five days, IDP Education’s 1H24 result was ahead of consensus, driven by an EBIT margin expansion and strong student placement growth. Adjusted EBIT for the first half of 2024 came in at $159 million, at least 18 per cent better than analysts’ forecasts. Student placement volumes were three per cent ahead of consensus. One thing to watch will be the International English Language Testing System (IELTS) business. Volumes were down 12 per cent compared to the previous corresponding half (year on year), driven by India, which was down 31 per cent. But on a consecutive half-on-half basis, the IELTS volumes were only one per cent lower, and the declines were more than offset by price increases. The rest of the world volumes grew 17 per cent year-on-year, and growth was ahead of industry rates of growth, suggesting the company is growing its share.
The Montgomery Small Companies Fund owns shares in Audinate, Seven Group and Cettire. The Montgomery Fund and the Montgomery [Private] Fund owns shares in IDP Education. This blog was prepared 14 February 2024 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Audinate, Seven Group or IDP Education, you should seek financial advice.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
