Half Year Company Reports 22 February 2021
ARB Corporation released its half year report on 16/02/2021 and its results were a huge improvement over the same period one year ago year.
Sales increased by 21.6 percent
Profit increased by 109.6 percent.
Net profit after tax increased by 113.5 percent
ARB will pay a fully franked half year dividend of 29 cents on 23 April, representing a payout ratio of 43 percent. It is retaining significant earnings to fund capital investment in new product research and development, store expansion, major capital expenditure and new manufacturing equipment.
Readers can look up its report to the stock market on the ASX 200 website: click on ARB and go to its announcements.
I cannot imagine many going on international holidays for the next couple of years, regardless of vaccination programs. The boom in four-wheel drive vehicles fitted out for outback holidays in Australia is likely to be habit forming. Similar comments apply to several of ARB’s other markets.
BHP
BHP announced a half year dividend of US$1.01 per share which will convert to about $1.43 AUD fully franked, meaning that it grosses up to a little more than $2.00 per share.
BHPs half year profit was $14.7 billion USD. 69 percent of its profit was generated from iron ore.
Commonwealth Bank of Australia
The CBA announced a half-year net profit after tax of $4.877 billion, and a half-year dividend of $1.50 per share fully franked. It is Australia’s largest bank by a big margin.
Cochlear
Cochlear produced a sound half year result and will pay an unfranked half year dividend of $1.15.
CSL
CSL announced a half-year profit to 31 December 2020 of $1.81 billion USD, and will pay a half year dividend of $1.04 USD or approximately $1.34 AUD. It is recommended that readers go to CSL’s briefing of 18 February 2021 which is available via CSL’s ASX web pages.
As one of the globes substantial pharmaceutical companies, CSL may achieve significant growth in the coming years as Covid-19 will require annual vaccinations; additionally those in risk categories will be urged by their doctors to reduce their risk through annual influenza vaccinations and other medical treatments.
Fortescue Metals Group
FMG announced a half year franked dividend of $1.47 but announced increased costs and delays associated with its Iron Bridge project and three senior executives left the company.
Mineral Resources
Mineral Resources announced a dividend of $1.00 per share fully franked. It is an iron ore and lithium miner and mining services contactor located in WA.
Rio Tinto
Rio announced a half year dividend of $3.9974 AUD plus special dividend of $1.196 together totalling $5.171 AUD fully franked which grosses up to $7.39.
Wesfarmers
Wesfarmers, owner of Bunnings, Officeworks, Kmart, Target, a chemicals business and an industrial safety business had a significant growth in revenue for six months to 31 December and announced a half-year dividend of 88 cents per share fully franked. It is recommended that readers look up its half yearly report /investor briefing via the ASX 200 site. Bunnings and Office Works performance were strong.
First Quarter Earnings: Westpac, ANZ and NAB
These three banks have a financial year commencing on 1 September, and each reported stronger earnings for the first quarter of their new financial year indicating that the worst aspects of their Covid-19 impact appear to be much improved.
Is Afterpay a Bubble?
The rise and rise of the share price of Afterpay makes me wonder how long it will be before the major banks introduce their own badged equivalents of this pay system and compete away its advantage and share price. A question to ponder.
Is Tesla a Bubble?
With all the world’s major car manufacturers busy developing their own electric vehicles, how long can Tesla maintain a share value in the stratosphere?
Successful Small Business is all About Customer Relationships. Big Business is Impersonal
Some examples:
1. A veterinary practice owner who runs a well performed practice recently commented that two veterinary students working part time in the practice as veterinary helpers were surprised that he and the staff of the practice had excellent personal relationships with the clients. The two students are receiving valuable lessons in what makes a practice profitable and successful long term.
2. Our local Foodland supermarket franchise is owned by a couple who previously owned a country pub. As publicans, they knew everybody in town and related to their customers—thus building up a good business. They were approached by a buyer due to the visibly busy nature and turnover of the business, sold, came to the city and acquired the supermarket. Subsequently the buyers of the pub lost the plot and its regular customers drifted away. The buyers then complained that they had been mislead as to the figures. The real problem was that they didn’t relate to the customers. Meanwhile our local supermarket is a very busy, friendly place, the owners know everybody, and visibly work hard. The delicatessen area caters to the local market, ready-to-eat meals fill a market niche for older couples and those living as sole survivors, and the business supports local community groups. The contrast with depersonalised Coles and Woolworths supermarkets is stark.
3. Successful dentists make the effort to find out the interests of patients and connection to other patients. Treatment records have brief comments on these personal matters as well as clinical details to provide conversation starters. The dentist-to-patient relationship is critical to long term patient retention and referral generation.
4. An accounting practice bought a smaller practice to bulk up its services. Two staff came with the purchase, but the principal was retiring and was only available for a short handover period. Despite being told of the urgency to meet and greet its key clients while the principal was available to smooth the introductions, each of the buyer’s accounting partners decided that they had more pressing priorities—including personal leave. Some of the bigger clients in the newly acquired practice, not having met the partner who was to look after them, decided to take their work elsewhere. Passing up the opportunity to establish personal relationships was a costly error.
5. A former owner of a major veterinary practice who still works in it part time solely in a clinical capacity has watched as corporate mismanagement has taken away much of the practice’s appeal. Remote corporate management apparently does not comprehend that huge dollars are escaping from their networks of practices.
6. A veterinary practice owner I know has outstanding personal communication skills. A competing practice was purchased by a corporate and in a short time many of that practice’s clients had relocated to his practice. I have heard many similar stories of good, privately owned veterinary practices receiving a boost to their business when a corporate chain bought out a nearby competitor. Big business is poor at relationships. Success in small business is dependent on relationships.
7. I drive a car purchased new from a dealer. Booking it in for a routine service was easy, but I learned to expect a telephone call from the service desk telling me that those doing the service had identified various matters needing attention. I got the feeling that I was being milked. A while back the vehicle developed a problem requiring an electronic adjustment. After paying a reasonably hefty bill, I took the vehicle home and received a lengthy email list of things that they said needed attention. I took it elsewhere to an auto repair business run by a friend of a family member who looked at the list, broke into laughter and deleted a lot of the items. I was happy to pay for what actually needed doing.
8. For many years I had my hair cut by an elderly barber, Ray, who always managed to ask me about my football team, Melbourne Storm. One day a modern unisex hairdressing salon opened next door. The next time I went for a haircut I asked Ray what impact the new unisex salon next door was having on his business. His reply was a crisp “none”. I asked him to elaborate and he said:
“I know what all my customers want, and I can talk to them about horse racing, Australian Rules, Rugby League, Cricket, Golf and Tennis”!
The next time I went for a haircut I watched as each of the persons ahead of me sat in the chair and Ray immediately asked them a question about their team’s prospects for the coming season and a conversation ensued. After my haircut, I stopped and peeped into the unisex salon next door and there were two hairdressers leaning against empty chairs! Ray read the sports section of the Herald Sun every morning and was up to date on sport, but other news was of little interest to him. He had learned that his conversations with his customers were the important part of his trade.
No matter how much they invest, a corporate cannot equip a dentist to drill two patient’s teeth simultaneously nor can a veterinary surgeon operate on two animals simultaneously. Privately owned practices can easily win the personal relationship contest against corporate practices.
9. Stockford Accounting Ltd.
Stockford listed on 28 November 2000; following its initial public offer at $1.00, it traded at $1.23 on debut but quickly got into trouble. Together with my then partner we were invited to join Stockford’s accounting aggregation but being independent-minded and not having sufficient faith in the business model proposed I said no thanks. Stockford quickly ran into difficulties but each time that it bought another accounting practice, it announced that the purchase was earnings accretive. Alas it seemed that the former partners who had built practices on client relationships and hard work seemed to magically discover the benefits of a 38-hour work week and a golf afternoon. Client relationships and service suffered and Stockford finished in liquidation within 3 years of its ASX listing.
This was a roughly similar lifespan as it took Smiles Inclusive to go from IPO to administration. In professional services, if your business model is not supportive of continued client relationships it is doomed to have mediocre results at best and often places the future of the business at risk of outright failure.
10. What happens when a rainmaker leaves an accounting or legal practice?
Many good practices have been built on the efforts of a particular person who worked hard to attract and service new clients and created work for others in the firm, including partners. Invariably the rainmakers concerned create lots of long-term relationships and referrals, while it is often the case that other partners are spoiled because new clients and new work keeps coming. The others assume that the success of the practices will continue and overvalue their own inputs when their particular rainmaker retires and haven’t schooled themselves into a rainmaker mode. The result is that the build-up of new clients diminishes significantly and the attrition rate among existing clients accelerates. Successful legal, accounting and financial advisory businesses are created and built on sound relationships.
11. Peter Smedley the CEO who did not now where his customers came from!
Peter Smedley had made a rapid rise through the executive ranks at Shell Australia and was then appointed CEO of the Colonial Group, where he was responsible for a series of strategic acquisitions building it into a major financial services business culminating in a successful sale to the Commonwealth Bank. He was then appointed CEO of Mayne Health which owned a network of private hospitals. It rapidly became clear to those running the hospitals that Smedley and his management team, recruited from his past relationships in dissimilar businesses, did not understand the Mayne health business. He offended the surgeons who had operating timeslots in the hospitals without understanding that it was they who booked in their patients for surgery by treating them rudely. Smedley mistakenly believed that the patients came from the health funds. As a consequence of their treatment, surgeons gave preferential patient bookings to hospitals not owned by Mayne Health, key Mayne Health staff began leaving for jobs in other hospitals and the business began making significant losses. Smedley was forced to leave, and Mayne Health changed its name in order to begin a slow rebuild of its business. Its hard to have good relationships with your customers when you don’t even identify who they are!
About Graham Middleton
I retired from Synstrat Group on 30 June 2020 having spent over 33 years advising dentists, doctors and veterinarians on practice and financial strategy, the last 26 years as a founder of the Synstrat group. Having spent over 56 years in the workforce in total and at age 75 I will not be commencing another business. I can be contacted on 0448 784594.
I am currently writing a book on the decisions and strategies which make Australian dental practice owners, including dental specialists, financially successful. These range from the decisions preceding practice ownership through to those entailed in an eventual, financially advantaged retirement. There is as yet no such comprehensive publication available to Australian dentists. It is my intention to provide a free copy to any dentist or person associated with dentistry who makes a reasonable tax-deductible donation to the Delany Foundation, a registered charity associated with the Patrician Brothers. This foundation contributes to schools in Kenya, Ghana and Papua New Guinea, and is one which my wife Kay and I support. The book may be available in two or three months and further details will be forthcoming. No Australian dentist owning or aspiring to own their own practice including dental students can afford to be without a copy.
For the present those who feel that they benefit from these newsletters can express their appreciation by including the Delany Foundation in their charitable gifts. Since it is run by volunteers its administrative costs are negligible and maximum dollars are spent on those in need of its help.
Best wishes to all
Graham Middleton
