Australian tech favourite Atlassian has forecast strong growth in the year ahead despite seeing its shares fall after announcing it will lose the CFO that helped pilot its successful IPO.
Speaking at the lodgement of its fourth quarter and annual results, Atlassian co-CEO Scott Farquhar said the company expects its strong growth to continue into 2018 after it booked a 36 per cent annual rise for the 2017 financial year.
It however surprised investors with the announcement that well-respected finance boss Murray Demo would leave the company after a six-year association. Mr Demo, who served on Atlassian's board for four years before coming chief financial officer in 2015 to help guide the company through its initial public offering, will leave the company on December 31 to focus more on his corporate and not-for-profit board positions.
Atlassian's share price dipped 2.2 per cent to $US37.97 at the close on Thursday on the back of its results announcements.
Mr Farquhar flagged recent product launches, continued customer "evangelism" and the successful integration of recently acquired Trello, along with a new marketing push.
Fifteen years on since the company launched, Mr Farquhar said workplace technology had changed dramatically, but the core premise behind Atlassian remained the same.
"Teams still hold the key to making meaningful progress and teamwork is still hard," Mr Farquhar told an analyst conference call following the business' full-year results.
"Our mission to unleash the potential in every team is more important than ever ... We believe openness is a critical component for changing how teams work."
Atlassian's 36 per cent revenue jump saw it hit $US619.9 million for the 2017 financial year, with an increased net loss of $US42.5 million. It blamed the losses on increased share-based compensation of staff and the amortisation of acquired intangible assets rather than any deterioration in the businesses' commercial performance.
The company's revenue growth exceeded its forward guidance set out in April, when it predicted that revenue would be in the range of $US616 million to $US618 million.
Looking into fiscal 2018, the company forecast slightly lower revenue growth of 33 per cent to 34.5 per cent to between $US826 million $US834 million.
It also predicted that it would increase its free cash flow which was up 92 per cent in the 2017 financial year to $183.3 million, a further 25.5 per cent to 31 per cent.
Twitter shares plunged more than 14 per cent overnight after the social media platform disappointed investors with stagnant monthly active user growth in the second quarter.
Despite its appeal among celebrities and public figures, Twitter has struggled to sustain its closely watched user growth even as it invests in features and live content to help draw viewers and boost user engagement.
It is in stiff competition for advertising dollars with other platforms like larger rival Facebook and Snap's messaging app Snapchat.
The company also reported a wider quarterly net loss and lower revenue, and said it did not expect its total revenue growth to pick up in the second half of the year.
Twitter had 328 million average monthly active users (MAU) in the three months through June 30, unchanged from the previous quarter. Analysts were expecting 328.8 million, according to financial data and analytics firm FactSet.
Its shares had surged some 40 per cent since mid-April as Twitter investors bet on another quarter of growth after the microblogging service reported adding 9 million more monthly active users than expected in the first quarter.
"If you really can't accelerate MAU interest given the daily tweets from POTUS, not sure when you will," said Michael Nathanson, senior research analyst of Moffett Nathanson Research, referring to an acronym for the president of the United States.
US President Donald Trump, one of the most active politicians on Twitter, has tweeted multiple times a day on average since his inauguration in January, according to social media analytics company Zoomph.
"The positive contributions to MAU growth from product improvements in the second quarter were offset by lower seasonal benefits and other factors, resulting in flat MAU quarter-over-quarter," said chief operating officer Anthony Noto during a conference call with analysts.
In the United States, Twitter's average monthly active users fell to 68 million from 70 million in the first quarter.
Origin Energy and ConocoPhillips have successfully completed performance testing at their APLNG gas export project in Queensland, raising expectations that they will now be able to make more gas available for east coast buyers.
The 90-day operational test at the $27 billion Australia Pacific LNG plant was completed in late July after the two-train project operated at more than 10 per cent above capacity, ConocoPhillips' Alan Hirshberg told investors in a briefing overnight Australian time.
The completion of the test was confirmed by Origin this morning.
The performance test, required under the terms of the debt financing for the $25 billion APLNG project, had required the owners to run the plant flat out for three months straight. That meant the partners had to sell some output into the low-priced Asian spot market, despite strong prices in the domestic east coast market that made local gas sales likely more profitable.
Origin has previously signalled that APLNG could sell about 67 petajoules of gas on the spot LNG market in 2017-18, so in theory the partners could make that volume of gas instead available to local buyers.
The news of the test completion comes at a critical time for the east coast gas industry, with the government to decided in the next few months whether the local market is tight enough to warrant triggering controls on LNG exports for 2018 under the new Domestic Gas Security Mechanism.
The controls would fall most heavily on Santos's GLNG venture, but it is already only producing no more than its contracted volumes. The third Queensland LNG export project, Shell's QCLNG venture, has been diverting some gas into the local market rather than selling into the Asian spot market, according to analysts.Mr Hirshberg said he didn't expect the export controls to affect APLNG given it already supplies about 20 per cent of the east coast market.
Downer EDI has secured 74.5 per cent of Spotless, bringing the contactor close to the crucial 75 per cent mark that enables it to attempt to delist the services group.
Downer's stake in Spotless has increased from 67 per cent a week ago after Spotless's board recommended investors accept the $1.2 billion hostile takeover offer.
The offer is due to close on Monday night, but Downer - which has already extending the closing date several times - may extend it again to try and secure 90 per cent of Spotless, at which point it can compulsorily acquire the remaining shares.
Downer plans to apply to the ASX to delist Spotless once it acquires 75 per cent of the company.
It can only proceed with the delisting without getting approval from investors if Spotless has fewer than 150 shareholders who own shares worth at least $500.
If Spotless, which has thousands of retail investors, still has more than 150 shareholders, Downer will need to hold a meeting to ask for investors' approval and set out a timetable for the de-listing, which will also need to be approved by the ASX.
Some institutional shareholders are unlikely to accept until Downer declares a final closing date for the cash takeover bid, which is worth $1.15 per share.
Downer assumed control of Spotless' board on July 19, appointing four directors, including Downer chief financial officer Michael Ferguson as well as two of its non-executive directors, Philip Garling and Grant Thorne. A former Downer non-executive director, John Humphrey, will also join the board.
But the new board will be disbanded if Downer de-lists Spotless. Downer has postponed its annual earnings report until August 29 to give it time to consolidate Spotless's earnings.
Australia's property market is facing a cooling period, but Citi reckons Fairfax Media's Domain and New Corporation majority-owned REA Group will benefit from increased listings.
The US-based investment bank upgraded both Fairfax, publisher of humble-but-awesome markets blogs, and News Corp, to a buy, and increased REA's 12-month target price.
While it may seem counter-intuitive that a cooling property market would be good for the online classifieds websites, Citi analyst David Kaynes said the opposite.
"Contrary to popular belief, Australia's rapidly rising house prices have been a significant headwind for the two portals that advertise properties for sale," Mr Kaynes said in a note to clients.
"Both sites charge per ad (30-45 day duration) and over the past decade the average time on market for a property was 50 days. In a balanced market (auction clearance rates around 60 per cent) roughly half of all properties will require more than one listing (ad) in order to achieve a sale."
However, Mr Kaynes noted auction clearance rates have averaged 71 per cent over the last three years and the June quarter had a recent peak of 74 per cent and the average time a house has been on the market, across Australia, has been down at 40 days – less than 30 days in Sydney.
Mr Kaynes reckons listing volumes would be 30 per cent higher in "normal" conditions.
"Residential property listing volumes have declined in five of the past six years, with listings falling 21 per cent from FY11 to FY17. In that same time period the construction boom has boosted the total housing stock by 10 per cent," he said.
"Through this period we have seen both declining housing turnover as well as faster sales."
Mr Kaynes said Fairfax stock is worth $1.31 if conditions go back to "normal".
Citi set a target price for Fairfax of $1.10, one for News Corp at $20.75 and REA's at $80.
Shares have tumbled in early trade, belying the more sedate fall that had been priced into futures markets heading into the open.
The ASX 200 is off 51 points of 0.9 per cent at 5734, with selling in the big banks (-1.1 per cent on average), Macquarie and CSL (both down 1.7 per cent) doing much of the damage.
The stronger Aussie dollar - last at 79.7 US cents - may be weighing on those two last names, with other globally-exposed businesses such as Amcor also off 1.7 per cent.
The miners are trading lower as well, aside from Fortescue which has jumped 3.2 per cent. Retailers are also doing nicely - Harvey Norman and Myer are up - as investors buy ahead of what some are hoping will be a better than expected profit season.
At the other end of the scale is Webjet, which has told the ASX this morning that it is having a fight with its auditor on a technical accounting matter relating to its FY17 financial statements, particularly in the treatment of transactions associated with the Thomas Cook agreement in August 2016. The company said that this will in no way affect cash earnings and confirmed guidance. But nobody likes to hear about audit issues, and the stock is down 6.2 per cent in early trade.
And here are the overnight market highlights by the numbers:
- SPI futures down 10 points or 0.2% to 5710
- AUD -0.5% to 79.68 US cents (Overnight range: 0.7957 - 0.8066)
- On Wall St, Dow +0.4%, S&P 500 -0.1%, Nasdaq -0.6%
- In New York, BHP +0.1%, Rio -0.3%
- In Europe, Stoxx 50 +0.1%, FTSE -0.1%, CAC -0.1%, DAX -0.8%
- Spot gold flat at $US1260.17 an ounce
- Brent crude +0.9% to $US51.45 a barrel
- US oil +0.7% to $US49.07 a barrel
- Iron ore -0.3% to $US70.20 a tonne
- Dalian iron ore +1.7% to 531 yuan
- Steam coal +0.1% to $US87.30, Met coal +0.0% to $US165.00
- LME aluminium - 0.2% to $US1938 a tonne
- LME copper flat at $US6330 a tonne
- 10-year bond yields: US 2.31%, Germany 0.53%, Australia 2.69%
On the economic agenda:
- Quarterly producer price index from the ABS at 11:30am AEST
- ​Advanced quarterly US GDP data tonight, Canadian monthly GDP figures
Stocks to watch:
- AWE and Sandfire Resources to release quarterly production figures
- Programmed Maintenance to hold annual general meeting
- Fortescue cut to hold at Argonaut, but raised to buy at APP Securities
- Virtus Health cut to hold at Morningstar
- Collins Foods raised to buy at APP
SPONSORED POST
It was a somewhat disappointing night for the bulls, who had been building a head of steam, writes IG strategist Chris Weston:
Our lead though comes predominantly from the S&P 500, which to be fair has traded in a punchy 22 point range, the biggest since the 6 July. On a positive note we have seen traders "buy the dip", but we didn't see the S&P 500 post a firm close below Thursday's low.
The US second-quarter GDP figures will be the event risk in upcoming trade, putting the US dollar on close watch, specifically against the Japanese Yen and the Aussie. We need to think about how these data points shape and influence the Federal Reserve's thinking and would a number north of 3 per cent really increase the prospect of a hike in December in their eyes? I suspect it increases the probability of a hike by between two to five percentage points, bringing the market's pricing back to 50 per cent.
However, US inflation reads released on August 1 and core CPI on August 10 I think will be the bigger influence on market pricing. Anyhow, with the Aussie now back below US80 cents, after touching a high of US80.65 cents, a strong US GDP print above 3 per cent would send the pair back to the US79 cent level, although the 21 July lows of US78.74 cents is the big level the bears are eyeing. Of course, a weak GDP number (of say 2.2 per cent and below) is a genuine risk and would send Aussie through the session highs.
Goldman Sachs boosted its iron ore forecasts after better-than-expected demand in China raised prices, but warned that it remains bearish on next year amid prospects for plentiful mine supplies and a worldwide glut.
The three-month forecast was raised to $US70 a tonne from $US55, and the year-end target increased by $US5 to $US60, according to a report from analysts including Yubin Fu and Max Layton received on Thursday. Next year, prices are still expected to drop, it said.
It's good to see the Goldies commodities analysts are still unafraid to make the big calls - a month ago they were wondering how they managed to get their forecasts so wrong this year.
Iron ore has surged in recent weeks to top $US70 a tonne on sustained demand from China, the largest user. Steel mills in the country have benefited from rising product prices and strong profit margins after the government shuttered some capacity, and remaining producers are making record volumes. That's helped to absorb increased mine supplies this year from Brazil and Australia, aiding miners including Rio Tinto, BHP Billiton and Vale.
"The strength in iron ore prices is likely to continue in the short term as strong Chinese steel and iron ore demand from infrastructure and property new starts is complemented by solid growth in global activity ex-China," the analysts said. Still, "while we hold a relatively bullish view on iron ore for the second half of 2017, we take a bearish view during 2018."
Spot ore with 62 per cent content in Qingdao slipped 23 US cents to $US70.20 a tonne on Thursday after gaining for five of the previous six weeks, according to Metal Bulleti. While it's rebounded from a low near $US50 a tonne hit in mid-June, the raw material remains 11 per cent lower this year.
"We expect supply pressure to build into 2018, mainly driven by Vale, Rio Tinto and BHP," Goldman said. "The market would need lower prices to clear a seaborne surplus of more than about 100 million tonnes during 2018, which we estimate at around $US50 to $US55 a tonne based on the cost curve."
Glencore says it has signed agreements to buy a 49 per cent stake in coal mines in Australia's Hunter Valley for just over $US1.1 billion ($1.38 billion), getting a share of assets it was expected to miss out on to China's Yancoal.
Glencore has long wanted Rio Tinto's Hunter Valley Operations (HVO) but Yancoal Australia was confirmed last month as the preferred bidder for Rio's Australian Coal & Allied division, which owns the mines.
Glencore said overnight, however, it would buy a 16.6 per cent stake in HVO from Yancoal and 32.4 per cent from Mitsubishi Corp, and then form a joint venture to run the mines with Yancoal, which will keep a 51 per cent stake.
Yancoal's Chinese parent company Yanzhou said on Wednesday its board had approved the transfer of the 16.6 per cent interest in the HVO joint venture, without naming the buyer, provided the Rio sale was completed.
HVO is widely regarded as the more valuable of the two Hunter Valley coal complexes that Yancoal is set to acquire from Rio Tinto for $US2.7 billion after Glencore lost out in a bidding war with the Chinese-owned coal miner.
Glencore wants the assets that adjoin operations it owns in the Hunter Valley. It first tried to acquire Coal & Allied in 2015, when Rio Tinto made it clear that coal was no longer part of its growth strategy.
Analysts said Glencore planned to blend the HVO coal with coal from its existing operations to customise shipments to power-generating customers.
The S&P 500 ended lower following a drop in technology and transportation sharesovernight, while oil prices extended their recent rally.
The S&P 500, along with the Nasdaq, reversed gains from earlier in the session, while MSCI's 47-country All World share index eked out a record high.
The Dow Jones transportation average, often seen as a gauge of the US economy's health, fell 3.1 per cent and hit its lowest point in nearly two months, while the S&P technology index was down 0.8 per cent, making it the day's worst-performing major group.
Tech has been the best-performing sector this year, leading the S&P 500's 10.6 per cent run in 2017.
"The general sentiment of the market coming into the day was that transportation stocks are telling us something that we're not paying attention to," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
"You've got a general feeling a lot of good news is priced into this market," Hogan said.
The Dow industrials set a record closing high, helped by a jump in Verizon.
The Dow Jones rose 0.4 per cent, the S&P 500 lost 0.1 per cent, and the Nasdaq Composite dropped 0.6 per cent.
"Biotech and tech are getting hit because they've been the outperformers. When people get nervous, they take money out of the outperformers first," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.
The biggest one-day drop in AstraZeneca shares, following a drug study failure, dominated trading in Europe, though a handful of results helped broader indexes nudge higher. The pan-European STOXX 600 ended down 0.1 per cent.
In the US Treasury and foreign exchange markets, investors continued to evaluate the Federal Reserve's recent statement that it is closer to paring its balance sheet.
The Fed said on Thusrday morning it expected to start winding down its massive holdings of bonds "relatively soon," despite striking a cautious tone on low inflation.
Many analysts and traders expect the Fed to announce its balance sheet reduction plans when its policymakers meet in September.
The Australian dollar retreated back below the US80¢ mark overnight as the greenback recovered from a hammering the previous session, when a US central bank statement triggered a rate-hike path rethink.
The US dollar index was up 0.3 per cent at 93.90 in late trade in New York amid a volatile day of market activity. The Aussie slid 0.5 per cent to US79.68¢, after having reaching US80.66¢ earlier. On Thursday it topped US80¢ for the first time since May 2015, and is up around 10 per cent since the start of the year.
Helping boost sentiment in the US currency were more reports of solid economic performance, bolstering bullish bets on the advance US government estimate of second-quarter gross domestic product scheduled to be released on Friday.
Shipments of key US-made capital goods increased in June for a fifth straight month, suggesting that business spending on equipment helped to boost economic growth in the second quarter.
Signs that the economy gathered speed in the last quarter were also bolstered by other data on Thursday (Friday AEST) showing a sharp narrowing in the goods trade deficit in June and increases in both retail and wholesale inventories.
Economists have lifted their forecasts for second quarter GDP to as high as a 3.5 per cent annualised rate. The economy grew at a 1.4 per cent pace in the first quarter.
"The economy still has legs in this long expansion from the end of the recession. The only risk we see is that the economy is running out of workers to do the heavy lifting and make us grow," said Chris Rupkey, chief economist at MUFG in New York.
Good morning and welcome to the Markets Live blog for Friday.
Your editor today is Patrick Commins.
This blog is not intended as investment advice.
Fairfax Media with wires.
1 new post(s) available. View post(s) Dismiss