Azzet reports on three stocks with market-moving updates to share today.
Reece tanks on sharp FY25 profit fall, dismal FY26 outlook
Shares in Reece (ASX: REH) were trading around 15.6% lower at 1:45 pm AEST (3:45 am GMT), after the plumbing giant reported a sharp fall in FY25 profit and flagged continuing headwinds for both its Australian & New Zealand, and United States operations.
While FY25 sales revenue slipped 1% to $8.978 billion, net profit after tax tumbled 24% to $317 million from $419 million in FY24, and earnings per share fell to 49 cents from 65 cents.
Earnings fell 20% to $548 million, and the group - which distributes plumbing, bathroom, and HVAC-R products - issued a final dividend of 11.86 cents per share, taking its FY25 dividend to 18.36 cents – down 29% on the previous year.
Putting a brave face on today’s update, CEO Peter Wilson told the market that while the group delivered a disappointing result – amid a turbulent year for Reece – it remains focused on the fundamentals.
During the year, the group completed three bolt-on acquisitions and significantly expanded our branch network and streamlined corporate costs to improve efficiency and better support our branch network.
“Despite current headwinds, we remain confident in our long-term approach. We are well capitalised and will continue to look beyond the cycle to protect and grow the business.”
Key FY25 numbers announced today:
- Net operating cash inflows of $600 million.
- Capex to sales ratio was 2.9%.
- Net debt increased to $590 million (FY24: $518m).
- ANZ earnings down 12% to $495 million.
- U.S, earnings down 10% to US$263 million.
- Total U.S. network increased to 267 branches.
- Total ANZ network comprised 676 branches.
Outlook
Reece expects a slow recovery in Australia and New Zealand and a constrained U.S. housing market over the next 12 to 18 months due to high mortgage rates and affordability challenges.
“Reece operates in large, resilient markets where housing undersupply and population growth will drive demand for infrastructure across both our regions,” said Wilson, who flagged the need for ongoing investment in infrastructure across both regions.
Reece's U.S. store footprint is heavily concentrated in the southern "sunbelt" states, a region, Citi recently noted, that has historically produced the majority of America's new home construction and acted as a structural tailwind in recent years.
However, this geographic skew is now becoming a relative headwind, with southern housing markets underperforming the rest of the country.
Housing prices across the region have declined as inventory levels rise toward GFC-era, which suggests ongoing pressure in Reece's core markets, and potentially increased competition as the pool shrinks.
It’s understood that Reece’s Waterworks business, which accounts for around 40% of its U.S. earnings is coming under more intense competition from rival STAline.
In addition to a slowdown in residential new construction, which impacted FY25 profitability, Morgans sees increased competition as a key risk to margins going forward.
Reece has a market cap of $7.5 billion; the share piece is down 55% for one year and down 22% in the last week.
The stock’s shares appear to be weak with little demand from investors.
Consensus is Hold.
Aussie Broadband jumps in litany of good news
Shares in Aussie Broadband (ASX: ABB) were up 17.9% after the internet service provider posted a strong FY25 result and upped its FY26 guidance.
After connecting more than 100,000 additional customers to the internet, the telco group delivered a 24% rise in annual net profit to $32.8 million.
The telco now supports more than 1.1 million services with a diversified offering that caters to the varied needs of our customers.
With underlying earnings up14.7% to $138 million, at the top end of guidance, the telco paid a regular full-year dividend of 4¢ per share.
While the dividend is flat on the year earlier, the telco also paid a special dividend of 2.4 cents per share during the FY25.
To lighten an earnings drag, the telco has also agreed to sell its Buddy Telco brand for $8 million to Commonwealth Bank-backed (ASX: CBA) telcos More and Tangerine.
The deal to sell Buddy, which has 14,000 customers, comes two months after CBA increased its stake in Tangerine and its sister company More to 40% from 30% previously.
While it’s not uncommon for big utilities like Origin and AGL Energy to sell telecommunications services, CBA Bank is the first major bank to follow suit.
However, the sale also accompanies a six-year contract with More and Tangerine to provide NBN network services, which are expected to add around $12 million in annualised earnings from FY27.
More and Tangerine are understood to be fast-growing Australian telecommunications providers, currently servicing approximately 250,000 residential and business broadband customers across the two brands.
Commenting on today’s update, CEO Brian Maher told the market that strong revenue growth in FY25 was driven by double-digit revenue growth across residential, business, E&G and wholesale segments.
“Over the year, we took the opportunity to increase our investment in core platforms and capacity to ensure Aussie Broadband is well positioned for long-term sustainable growth with a secure and resilient network,” said Maher.
“We continued to invest in our owned Aussie Fibre network, with a focus on winning customers in on-net and near-net buildings within our existing footprint, which will increase utilisation and improve return on invested capital.”
Key FY25 numbers announced today:
- On a like-for-like basis, revenue grew 12.4% in FY25
- Gross margin improved by 0.6 ppts to 36.7%.
- Market share of on-net NBN services is now 8.4%, an increase of 1.1 ppts year-on-year.
- Residential mobile delivered strong revenue growth in FY25, up 15.7% year-on-year.
- The Business segment delivered 11.4% growth in revenue.
- Enterprise & Government segment grew revenue 11.1% year-on-year.
- Wholesale delivered strong like-for-like revenue growth of 23.1%.
- Symbio’s earnings up 35% on a pro forma basis.
Outlook
In April, the telco revealed its Look-To-28 strategy, which outlines our ambitions for the next three years.
FY26 has seen continued growth with around 12,100 net new broadband connections.
Buddy has started the year well, growing to almost 16,000 connections.
Meanwhile, the E&G pipeline trajectory remains strong with a number of large opportunities.
At year’s end, the telco and Accor signed a strategic five-year partnership to deliver enterprise-grade voice and high-speed internet services to Accor’s extensive portfolio of hotels across Australia.
Future guidance and likely M&A activity also added to investor interest in the stock today, with the telco flagging $157 million to $167 million in underlying earnings in FY26, up 3.4% higher at the midpoint Jarden and Visible Alpha predictions of $157 million.
This guidance includes a reduced year-on-year investment required for Buddy and does not include the gain on disposal. The financial impact of the new Wholesale Services Agreement is expected to be minimal in FY26.
Aussie Broadband has a market cap of $1.5 billion; the share price is up 70% in one year and up 18% in the last week.
The stock is in a strong bullish trend confirmed by multiple indicators.
Consensus is Moderate Buy.
Metallium rallies on partnership that could revolutionise REE refining
Shares in Metallium Ltd (ASX: MTM) were up 9% after the mid-cap miner announced a partnership with Rice University – a research university in Houston, Texas - to advance its Flash Joule Heating (FJH) technology.
While FJH has already shown it can upgrade feedstocks such as monazite and mixed rare earth carbonate (MREC) into solvent-extraction-ready products - offering Western supply chains an alternative to Chinese toll refining - the Rice partnership is expected to test whether FJH can go further and directly separate individual rare earths.
If successful, the company believes it could dramatically reduce or even replace the need for large SX plants, giving Western projects a domestic refining solution.
“Rice University collaboration is tackling the next frontier: using FJH to separate individual REEs directly, potentially bypassing solvent extraction,” said Metallium CEO, Michael Walshe.
“With SX plants taking years, vast capex and footprint, and massive solvent use, even partial success would be transformative. This positions Metallium for near-term revenues from partnerships and licensing, and long-term leadership in REE refining”.
Backed by around $1 billion in U.S. Department of Energy funding for supply chain security, this development positions Metallium at the forefront of efforts to reduce reliance on China, which currently dominates more than 90% of rare earth refining.
“Metallium’s FJH technology is the first credible midstream solution I’ve seen that improves existing flowsheets today while opening the door to entirely new separation methods,” said Tony Hadley, non-executive director who has spent over 20 years in rare earth metallurgy.
“I know the scale, cost, and complexity of solvent extraction plants. This is exactly the kind of innovation needed to reduce reliance on China.”
As a mineral exploration and metal recovery technology development with assets in Australia, Canada, and the U.S.
Last week Metallium’s wholly owned subsidiary Flash Metals was granted approval to lease two electric waste (e-waste) processing sites in the U.S., in an attempt to push the deployment of the Flash Joule Heating metal recovery systems.
As of 30 June, the company had cash and cash equivalents $7.3 million.
In an attempt to accelerate the U.S. commercial rollout of FJH technology, the company completed a $50 million institutional raise back I July.
Operating cash outflows for the June quarter totalled $2.2 million.
Metallium Ltd has a market cap of $423 million.
While the stock’s 200-day moving average is trending upwards, the 5-day moving average is below the 20-day moving average. This is a bearish sign, for, at least, the near term.
Consensus is not covered.
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.
