As easy as ABC

This month I have been watching Alan Kolher on the finance segment of the ABC News rattle off companies that are warning shareholders that they will not going to meet there published profit forecasts for the financial year. Companies failing to meet their guidance are being punished on the market. How refreshing therefore is it to see FSA come out with their three line profit upgrade just weeks out from 30 June.
While I would prefer to see some more commentary, I am prepared to put my neck out and make the following predictions based on gut feelings.
FSA will come in at a 25% profit increase for the financial year. This will be the second year in a row of twenty five percent plus increases in profit. Well done.
The profit increase will come from both the services and business lending sectors but mainly business lending. Given the historically low interest rates, I think the home lending will be stable. I also struggle to see that the personal lending will be able contribute anything while it’s in a start-up phase.
I would also like to think that the profit increase is not a result of accounting adjustments. You can only pull that rabbit out of the hat so many times.
I also think the final dividend will be approximately 5 cents making a 7.5 cent dividend for the year. This is based on the initial guidance of a profit increase of between 8% to 13% and a dividend of between 5.25 cents and 6 cents. I am therefore working on the idea that every 6% increase in profit will result in 0.75 cent increase in dividend. If 25% profit is achieved, there will be a 12% increase in the initial profit guidance allowing for additional 1.5 cents in dividend. Simple logic from a simple bloke hey.
Bring on reporting season and we can stop speculating about this cash cow. I will report on the bankruptcy figures in early July. Until then, keep smiling, brighter days await.