ASX 200 (XJO) Friday – my thoughts on the TLS, AMP & AGL reports

The S&P/ASX 200 Index (ASX: XJO) is expected to open flat this morning according to ASX futures. It was a busy day of reporting yesterday, here’s what you missed.

ASX share market recap

The ASX 200 started Thursday strongly but finished on its lows (-0.7%) as investors digested a flurry of earnings reports from AMP Limited (ASX: AMP), Telstra Corporation Ltd (ASX: TLS), and AGL Energy Limited (ASX: AGL).

Most sectors fell, with telecommunications off 4.7% and the banks giving back recent gains, down 1.1%. The leaders for the day included Treasury Wine Estates Ltd (ASX: TWE), adding 12.3% after delivering better than expected sales growth, and Premier Investments Ltd (ASX: PMV) who reported record profits despite being recipients of JobKeeper and refusing to pay rent on many of its properties.

Unemployment data showed an increase to 7.5%, meaning 1 million people are now out of work, and this is before Stage 4 lockdowns in Victoria.

Featured video: ASX Results Recap

Along with video above, my views on the key takeaways from yesterday’s reports are as follows:

AMP surprises with special dividend

Despite a series of self-inflicted pain and missteps, AMP has shown signs of bottoming, announcing a special dividend of 10 cents per share following the sale of AMP Life. The AMP share price rallied 10.9% as a result. Underlying profit was $149 million, a 42% fall on 2019, but outflows from wealth management were just $1.2 billion. Management has acquired the 15% of AMP Capital it doesn’t own, affording full control of this $200 billion growth engine.

Summary: A solid result, capital return and renewed focus on growth.

Telstra share price tumbles

Despite reporting in line with guidance, a 14.4% fall in net profit to $1.8 billion, and maintaining its dividend, Telstra ended the day down 8.3%. Investors were clearly concerned about management’s guidance on the lingering impacts of COVID-19, ignoring the $40 million profit growth excluding NBN losses. Telstra has ramped up its 5G connectivity, targeting 74% of the population by June 2021, leveraging off the surge in digitisation.

Summary: Good signs for this digital infrastructure business.

AGL runs out of franking credits

AGL reported a 12% increase in statutory profit, benefitting from the revaluation of electricity futures contracts, but profit actually fell to $816 million. The final dividend was cut 18%, sending the AGL share price down 9.6%, the worst performer in the ASX 200. Of greatest concern was management’s decision to cease paying franking credits, as years of losses have eaten away at their reserves.

Summary: Difficult period ahead for the coal-reliant company.

S&P 500 weaker, Nasdaq finishes higher

The S&P 500 remains just shy of its record, falling 0.3% on Thursday, as cyclical sectors continue to sell-off whilst investors await an announcement on further stimulus.

Once again, the Nasdaq finished 0.3% higher, on the back of an announcement that Apple Inc. (NASDAQ: AAPL) would be launching Apple One, a subscription service that includes their many products in a simple package; it seems they are heading in the same direction as Adobe Inc. (NASDAQ: ADBE) as they seek to lock in annual revenues.

At the time of writing, the ASX 200 looks to open slightly weaker, with Newcrest Mining Limited (ASX: NCM) and Baby Bunting Ltd (ASX: BBN) due to report earnings.

For a run-down on all the biggest reports on the ASX this week, check out Rask Media’s ASX Results Recap video.

And if you’re looking for an ASX reporting season calendar, we’ve got you covered.

This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. He may maintain positions in the securities mentioned. To get in contact with Drew, click here to visit the Wattle Partners website.

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Disclosure: Drew Meredith is the author of this post. He may maintain positions in the securities mentioned.

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