A busy period for HLG, any predictions of the AGM on the 9th? Considering going
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A busy period for HLG, any predictions of the AGM on the 9th? Considering going
Winner,
I broadly agree with your numbers but guess gross margin at 56.5% down 2.8% from this year. Sales $227m, GM 56.5%, expenses flat at $108m, NPAT $15m.
Apart from the GM they achieve over the next few weeks the other key issue is expenses management - expenses have risen from 44%-49% over the past 7-8 years.
In this environment they need very tight expense control and I've assumed they pull it back to 47.8% from this years 48.9%. The last time GM was pressured like it might be this year next 53% in 2009 expenses were 44%.
Bear in mind HLG are facing a 'competitive market' as well as 'margin pressure' from higher input costs.
This affects Gross Margin 2 ways
Are HLG reducing prices in this competitive market? Probably are to some extent so one hit to margins.
Higher input costs are going to be the biggest worry. Input costs up 10% or more is a decent chunk out of margins.
Put the two factors together I reckon my 55% is the best it will be for them his year.the 53% I also showed I think is the likely outcome.
Announcements post Xmas will be interesting.
After the recent shocker of an announcement hope the guys and gals from HLG have cheered up a bit and have a good time at the ASM today
Might elaborate a bit on what's happening
They seemed pretty happy and acknowledging how tough it is out there at the moment is a good sign. Emphasis seemed to be on international competition, fierce market conditions and fx impact on margins.
Obviously margins are being impacted. Initiatives like (extract)
• Working closer with our suppliers and negotiating better cost prices. Reduced demand in China has given us the ability to achieve meaningful results with this strategy.
• Reviewing the current supply base and souring from new suppliers where there is a pricing advantage.
• Negotiating freight options and reducing the ratio of air freight to sea freight
• Paying careful attention to our buying. The gap between first margin and achieved margin is probably the biggest single factor we have full control over. Careful attention to timing, quantity, and pricing will bring results.
• Constantly reviewing the product mix and where possible improving the ratio between higher margin and lower margin product.
They say this will only 'soften' ' the impacts. Yes tinkering around the edges as often said.
Arbroath, I still reckon F16 earnings will be closer to $10m than your $15m.
(Cynics note: good they listed all those initiatives above but one would hope that's what they do all the time (good and bad) and not just as a reactionary measure in the tough times)
Percy will love this bit from the CEO speech. He keeps on telling us this.
Rental costs remain the single biggest factor. Over the past 5 years our rent costs as a percentage of total sales have risen by 1 percentage point. That translates to over $2 million before tax. In other words our landlords are taking an increasing share of our profits.
Hope they are getting a 'fair and reasonable' deal from the landlord on the new superstore in Christchurch. Wouldn't want that landlord in particular to take a greater share of profits would we
Keep in mind their worst result in the past decade is $12.8m around GFC time. The great thing with HLG is no debt. Might struggle to achieve my $15m guesstimate but the sky needs to fall for them to get squeezed down to $10m IMHO.
re Expenses - companies always sharpen the pencil when GM is under pressure so I'd expect some result in that area.
That year Gross Margin was 52.8%. Sales were $198m compared to this years $125m/$230m (haven't grown much over the last 7 years have they - less than 2% pa)
But the main factor when making a comparison to that year is that expenses are now more than $20m higher (jeez expenses increased in $ terms about as much as sales have increased)
I sticking with my forecast that at most NPAT will be $13m but likely to be closer to $10m.
One thing though - dividend will be still be pretty high and not unusual for them to pay out heaps more than Free Cash Flow
Good increase today - everybody feeling happy
And Arbroath during F09 (the bad year for them) the HLG share price peaked at 382 and hit 194 at one point
That 382 is a bit spooky eh
The more I look at HLG the more convinced I am that NPAT will closer to $10m than $15m
As Percy quite often reminds us share price follows earnings I see a decent sort of trade coming up some time next year. Chart demonstrates why
An observation - one would have to say that earnings have been trending down over the last few years. This suggests to me that the things they talk about like competition, online choices for consumers and the coming of international competiton have already started to have an adverse impact. And then staying in the game requires new larger stores in (expensive?) localities which doesn't help the cost of doing business. Just a rave
Pretty good dividend though - at the present time about all that's going for it