The Aussie equity managers retaining the faith in Qantas

There are eight Australian equity funds retaining a stake in Qantas, including five from Pendal, as the company released its FY20 earning results.

The firm announced to the Australian Securities Exchange (ASX) that it had reported a pre-tax profit of $124 million, thanks to profits of $800 million before the pandemic. However, this was down 91% on its result in the previous year.

Its net loss after tax was $1.9 billion compared to profits of $840 million last year.

Shares had fallen 45% since the start of the year to 20 August compared to losses by the ASX 200 of 6.8%.

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Qantas said the result was dragged lower by $1.4 billion write-down in the value of assets such as its Airbus A380 fleet and $642 million in one-off costs associated with restructuring including redundancy payments

In a speech, chief executive Alan Joyce, said this was the most troubled time the firm had suffered in 100 years.

“COVID punched a $4 billion hole in our revenue and a $1.2 billion hole in our underlying profit in what would have otherwise been another very strong result,” he said.

“Despite the recent setbacks, we know conditions will ultimately improve. And the hard decisions we have made so far are about making sure Qantas is ready to take part in the recovery.”

There were eight Australian equity funds holding exposure to the company, the largest weighting being in the ETFS S&P/ASX 300 High Yield Plus ETF which held 3.7%.

This was followed by Franklin Templeton Australian Equity, Ironbark Karara Australian Share, Pendal Australian Equity, Pendal Australian Long/Short, Pendal Australian Share, Pendal Focus Australian Share and Pendal Geared Imputation.

According to FE Analytics, within the Australian Core Strategies universe, since the start of the year to 31 July, the best-performing funds were Pendal Australian Equity and Pendal Australian Share which both lost 10%.

This was in line with the ASX 200 index and slightly less than the wider Australian equity sector which lost 9% over the same period.

The worst-performing fund out of the eight was Pendal Geared Imputation which lost 32% over the period.

In a July update, the Pendal Australian Share fund, which had a 2.9% weighting to the airline, said: “We retain conviction in Qantas, despite large near-term negative impact from travel restrictions. Management have moved quickly to cut costs and underpin liquidity and balance sheet strength.

“Whilst international travel likely to remain disrupted for an extended period. Domestic travel - a larger and more profitable part of its business – should start to normalise sooner, with Virgin's restructure offering Qantas the opportunity for greater market share. Management are using this episode to rebuild the airline on a structurally lower cost base, underpinning very attractive medium-term valuation.”