Australian Stock Market Report – Midday 2/20/14

Mid Session Report
(12:00 AEDT)

For a second consecutive session local stocks have found the initiative locally in the absence of any offshore inspiration. U.S. stocks ended lower overnight influenced by disappointing housing data and the minutes from the last FOMC meeting.

Locally investors have focussed on a number of better than expected profit results. Another significant factor supporting the market has been the increase in payments to investors through dividends, Leightons Holdings being one example. The building contractor announced a full year profit which was at the top end of its guidance range. The performance of its Thiess subsidiary underpinned the result. LEI reported an underlying net profit after tax of $584 million. The company guidance suggested a result of between $520 million and $600 million should be anticipated. LEI shares were higher by more than per 6 cent as a result.

Fairfax Media (FXJ) reported an underlying profit of $93.1 million for the six months to the end of December, an increase of 12 per cent compared to $83.1 million a year ago. The result was driven by a 52 per cent increase in earnings from the metropolitan media business, which includes its major newspapers and websites like the Sydney Morning Herald and The Age, along with its Domain real estate business. Net cash at the end of the period was $80 million, which is a significant improvement on the $154 million net debt at the end of June last year. The shares traded at their highest level in more than two years after the result; a short time ago they were up 20%.

Life insurer, AMP (AMP), announced a drop in full year profit due to higher claims and continued lapse rates or the loss of customers. Net profit fell two per cent to $672 million compared to $689 million in 2012. The result featured growth in wealth management and AMP Bank. However the result was hampered by continued headwinds in the life insurance business. A final dividend of 11.5 cents per share, is unchanged on the previous year.

Economy-wide spending continued to expand at a solid pace at the start of 2014 according to a new survey. The Commonwealth Bank Business Sales Indicator (BSI) - a measure of economy-wide spending - rose by 1.0 per cent in trend terms in January, consistent with the 1.0-1.2 per cent gains recorded over the previous three months. This was the 17th consecutive month of spending growth.

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