Was quite busy doing real work today so here is my belated detailed analysis and thoughts.
For my money Balance has a good point. Herdlicka is spending money on staff and marketing with little or no restraint and it will obviously materially affect the EBITDA margin. Only time will tell if this is a better way to grow the company than Geoffrey Babbage's more conservative approach. The considerable inventory build suggests they could have sold more if the demand was there but it wasn't. In fact demand was short of production capability by quite a bit and that's a first to the best of my recollection. Maybe that's why marketing is being seriously ramped up ?
The other thing to keep in mind is sales and profit growth, (despite all the extra staff and marketing spend in FY19) has slowed quite considerably compared to last year. Net profit after tax grew 116% last year so ~ 47% growth for FY19 is clearly not nearly as impressive.
Likewise sales growth last year was 68%, just 41% for FY19 and that with heaps more marketing and headcount.
When we look at the 1H FY 19 v 2H FY19 split we see 1H sales of $613m generating $152.7m net profit and 2H sales of $691m generating just $135m net profit and its the margins in 2H shareholders get to "enjoy" going forward.
Its looks to me like Herdlicka is throwing a heck of a lot of money at the operation and growth is slowing quite materially whereas Geoffrey Babbage's approach was far more successful. Don't suppose he can be coaxed out of retirement ? Could be a rough few days ahead as analysts seriously revise their numbers.
Cash on hand amounts to 63.2 cps.
https://www.marketscreener.com/A2-MI...22/financials/
Prior to this announcement average analyst view is for sales of $1,660m next year and 32% EBITDA margin.
Retuning this to the 28.2% EBITDA margin the company is now forecasting and everything else in the above average broker forecast for FY20 staying constant this gives
revised NPAT of $326m for FY20, only 13% net profit growth next year on 27% sales growth and all this on vastly higher marketing and human resources costs.
$326m gives 44.4 cps earnings and at a closing price of $14.81 that puts ATM on a forward PE of 33.4. That looks a bit pricey to me for the expected growth rate, (has traded at lower rates in the past with much higher previous eps growth rates) and caution appears to be warranted.
Finally, no analysis is complete without a look at TA. Very clear break down through the 100 day MA today and the bounce this afternoon was fairly muted in comparison to the initial drop and did not recover above the 100 day MA.
Hmmmmm.
Some real caution appears to be warranted here. All the numbers I am looking at tell me very clearly that profit growth is slowing down at quite a worrisome rate !
Disc Not holding and not intending to directly hold. Hold Kingfish and they hold heaps of ATM.