Insurance Australia Group, APA Group, Woodside Petroleum, Woolworths - First Impressions from Reporting.

Bell Potter

Insurance Australia Group (IAG): Solid result that was also boosted by higher reserve releases – the only “slight” negative in the result. Other than that, top line growth was strong – thus the improved guidance for the year – while margin guidance was maintained although boosted again by higher planned reserve release. Capital position very strong – more buybacks on the way perhaps. Good outcome overall. | GWP growth 4.7% pcp (BP 0.8% pcp, consensus 1.5%, guidance relatively flat); Reserve release 3.7% of NEP (BP 3.2%, consensus 1.8%, guidance at least 1%); COR 87.5% (BP 89.1%, consensus 87.6%); Reported margin 13.5% (BP 13.7%, consensus 13.6%, guidance 12.5-14.5% range), underlying margin 12.6% (BP 11.5%, consensus 12.9%); and CET1 multiple 1.09x (BP 0.98x, consensus 1.01x, target 0.9-1.1x), PCA multiple 1.81x (BP 1.72x, consensus 1.65x, target 1.4-1.6x). Outlook: IAG has raised its FY17 GWP guidance to low single-digit growth, compared to its previous relatively flat growth prediction. IAG has maintained its FY17 reported margin guidance of 12.5-14.5%, with an expected outcome around the middle of the range.

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APA Group (APA): Segment EBITDA: Energy Infrastructure (95.2% of group EBITDA) up 12% to $751.7m; Asset Management (3.2% of group EBITDA) down 9.5% to $25.2m; Energy Investments (1.6% of group EBITDA) down 10.2% to $12.5m. | Operating cash flow up 12.1% to $518.2 million. | Outlook: EBITDA for FY2017 expected to be at the upper end of f $1,425 million to $1,445million range provided at FY16 results. Distributions per security for the 2017 financial year are still expected to be in the order of 43.5 cents per security, with the 2.0 cents per security of franking credits announced for the half year and any further franking credits which may be allocated to the final distribution enhancing that cash payout. Net interest costs for FY2017 expected within a range of $510 million to $520 million.

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Woodside Petroleum (WPL): Production up 3% to 94.9 Mmboe. | Reduced unit production costs to $5.0/boe, 28% lower than 2015. | Net cash flow from operations of $2,587m as compared to US$2475m in pcp | Wheatstone timing; T1 mid-CY17, T2 6-8 months later. Pluto: WPL has flagged the potential for tie-back of successful multi-Tcf exploration targets. Senegal/Myanmar to have 2 appraisal wells each in next 12 months. | Outlook: 2017 production guidance 84 –90 Mmboe and Capex guidance of US$1.6bn.WPL guiding to 15% production growth from 2017 to 2020.

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Woolworths (WOW): Segment Performance: Australian Food down 13.9% to $811.6m and Liquor sales were $22.3bn, +0.7% on H1’15. Comparable sales growth 1.9%; Endeavour Drinks Group up 3.1% to $302.3m; NZ Food up 2.4% to $154.9m; Big W down 137.3% to ($27.2m); Hotels up 3.1% to $139.3m. | Net operating cash flow up 75% to $1252.7m. | Outlook: “The focus of the Woolworths Group for H2’17 remains on our five key priorities, and with the exception of BIG W, we expect to see further progress in the second half. However, we still have a long way to go. In the second half we will continue to invest in improving the shopping experience and expect higher depreciation and team incentive payments. We continue to be vigilant about the competitive environment for all of our businesses. We also note the benefit to our Food and Drinks businesses from the unseasonably warm weather, particularly in January and early February.”

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