ASX News LIVE | ASX Opens Higer; Earnings Season Final Dash with TPG, Downer, Ramsay Reporting

The ASX 200 closed up +0.58% to 8,091.9 as the local share market shrugged off tech concerns on Wall Street and followed the Dow Jones, which reached a fresh record-high overnight.

Positive sentiment on the larger non-tech caps in the US was driven by the higher-than-expected US GDP, which came in at 3.0% quarter-on-quarter, largely driven by increases in consumer spending, private inventory investment and non-residential fixed investments (structures, IP, equipment etc).

Industrials and energy stocks were the main drivers today as oil steadied above US$76 per barrel for WTI Crude.

Industrials were lifted thanks to a stellar day by major Downer EDI, which gained +17.2% after its earnings today.

Downer’s business showed a remarkable turnaround, swinging to a $82 million annual profit from a $386 million loss last financial year.

Tech stock Appen also reported, though with less stellar results, causing the stock to plummet -18% to close at $1.00 per share.

The big news for the Australian stock market next week is likely going to be Wednesday’s June Quarter GDP figures, due 11:30am.

We’ll be here for that and all the other major news on the ASX and wider market.

Another interesting chart from Alex Joiner over at IFM. This time, we can see the impact of stage 3 tax cuts on household deposits.

With retail spending remaining flat between June and July, it looks like Australians are saving rather than spending.

What big ticker purchases are you holding off from buying?

Looks like Stage 3 tax cuts hit peoples' bank accounts and stayed there with a sharp rise in resident deposits. So far they have been saved and not gone on discretionary retail… maybe for bills or to keep in the offset account… pic.twitter.com/x8DSwpr0eM

— Alex Joiner 🇦🇺 (@IFM_Economist) August 30, 2024

The nation’s largest private hospital operator Ramsay Health Care [ASX:RHC], has seen its shares fall by -7.6% as its reports highlighted the challenges its margins have had from inflation.

Ramsay says it will demand new funding deals from insurers if wage increases exceed expectations, as it warned cost inflation means it will take years before margins return to pre-pandemic levels.

Ramsay ended its long-standing deal with major insurer Budpa on 2 August when the pair failed to agree on patient hospital costs.

Ramsay chief executive Craig McNally told analysts on the earnings call today that the company’s margin recovery was being slowed by significantly higher costs as the company posted full-year earnings in line with its forecasts but disappointed investors.

He said the only way to resolve the financial pressures facing Australia’s private hospitals, which are the subject of a review by Health Minister Mark Butler, was for insurers to increase their funding to the system.

‘Wage inflation exceeding expectations remains a critical risk. If there are substantial wage increases we won’t hesitate to bring people back to the table,’ he said.

Shares in Ramsay have been down by over 20% in the past 12 months as the company struggles with costs and labour disputes with nurses.

The latest data from the Australian Bureau of Statistics (ABS) showed retail spending remained flat between June and July.

That means the annual rate of growth in retail spending has dropped from 2.9% to 2.3%, in seasonally adjusted terms.

Source: ABS

The figures for July showed:

Department stores fell 0.4% (-$7.2m).
Clothing, footwear and personal accessory retailing fell 0.5% (-$14.2m).
Household goods retailing was relatively unchanged 0.0% ($1.1m).
Food retailing rose 0.2% ($30.2m).
Other retailing was relatively unchanged 0.0% (-$2.3m).
Cafes, restaurants and takeaway food services fell 0.2% (-$9.5m).

It’s another blow for struggling retailers as the cost of living impacts households buckling under the pressure of high interest rates and ongoing inflation.

Star Entertainment Group [ASX:SGR] is once again in the headlines for all the wrong reasons.

Troubled casino operator has halted its shares today as a new report by the NSW Independent Casino Commission (NICC) has cast further doubt on the future of Star’s Sydney Casino.

The report reveals that Star Entertainment has failed to adequately address its toxic culture and ongoing issues with criminal infiltration. This follows a 2022 report that deemed the casino unfit for its license due to evidence of money laundering and large-scale fraud.

In response to the report’s release, Star Entertainment entered a trading halt and postponed the publication of its full-year results.

In the report, NICC Chief Commissioner Philip Crawford expressed disappointment in the casino’s slow progress, noting that the company had not moved quickly enough to address the governance and cultural concerns raised in the initial report.

Despite the grim findings, recent leadership changes could potentially salvage the struggling business.

The NICC acknowledged that the new appointments, including Group CEO Steve McCann could bring in a fresh start, saying they bring ‘valuable experience to the process of regulatory engagement and cultural transformation‘.

However, the regulator still harbours concerns about the company’s transparency and ability to fund an urgent business turnaround.

The NICC will consider the report’s findings, which include four compliance breaches, in the coming weeks.

As of now, Star Entertainment Group has not commented on the report’s findings.

The company’s stock has faced immense pressure this year, with it now down by over 50% in the past 12 months.

The Australian stock market saw positive momentum by midday, with investors scrutinising the final wave of corporate financial reports.

The ASX 200 ticked up 0.44% to reach 8,080.4 points, propelled by strong performances in the energy and industrials sectors.

Downer EDI emerged as a standout in the industrials category, with its shares skyrocketing 18.8%.

This surge followed the contractor’s announcement of an $82 million annual profit, marking a significant turnaround from the previous year’s $386 million loss.

The Australian market’s upward trajectory mirrored overnight gains in the United States, where the Dow Jones advanced 0.6%. However, the S&P 500 remained flat, while the Nasdaq experienced a slight dip of 0.2%.

Despite the S&P 500‘s small decline, three-quarters of its total stocks finished higher. While the Russell 2000, representing small caps, saw a 0.7% increase.

In contrast, tech giant Nvidia saw its stock value decrease by 6.4% following the release of its latest quarterly earnings report, which fell short of some investors’ expectations.

On the domestic economic front, Australian retail sales figures for July remained unchanged from June’s 0.5% growth, falling below the anticipated 0.3% increase.

Here’s day five of our new Fat Tail Daily video series.

We’ve heard that you want more discussions with editors about market movements and their thoughts — and we’ve listened!

Publisher James ‘Woody’ Woodburn will be sitting down with our Fat Tail Daily editors to discuss the key trends and offer unique insights into market movements.

Expect more of these coming soon. Depending on schedules, we will aim to get at least three out a week, but it could also be more.

If you have any thoughts about the length, format, or topics you would like discussed, send us an email at support@fattail.com.au with the subject header: ‘Fat Tail Daily Video Feedback’.

Thanks, and enjoy today’s discussion with Strategic Intelligence Editor Nick Hubble.

Major contractor Downer EDI [ASX:DOW] has seen its shares surge by over 10% in early trading as the company released its FY24 results.

The company has managed a remarkable turnaround, swinging to a $82 million annual profit from a $386 million net loss last year.

The loss was largely due to a series of massive write-downs, but the operational performance was also strong.

Here are the bottom-line results:

Source: Downer EDI

The company saw improvements across all of its earnings, margins, and cash metrics for the year as its strategy reset of cost-cutting and debt reduction appeared to have worked.

The company said that it had $38.5 billion of work-in hand and secured a ‘high proportion’ of its revenues for FY25.

It also claimed it was on track to achieve its $175 million cost out target, with $45 million remaining by the end of FY25.

Looking ahead the company said it H2 was likely to skew towards road services both here and in New Zealand.

Meanwhile, the targets for FY25 have an EBITA margin of >4.5%.

Good morning. Charlie here.

The ASX 200 opened up +0.49% to 8,084.2 this morning, but early ASX Futures pointed to some potential rough patches, so stay tuned.

Overnight, we saw some jitters within the Nasdaq, which fell by -0.23% as tech remains shaken after the Nvidia selldown, while the Dow hit all-time high’s and small-cap Russell 2000 continued to press higher.

The US second-quarter GDP came in stronger than expected, up 3.0% quarter-on-quarter, alleviating concerns of a slowing economy.

While slower-than-expected inflation in Germany and Spain also relieved the European Central Bank and traders there.

The ECB is expected to keep rates on hold next month, but European markets were positive overnight on any signs of improvement in the ailing continent.

On the ASX we have the final day of earnings season with big reports from Ramsay Healthcare, Downer, TPG Telecom, and Dicker Data, so stay tuned for those.