Firstly the positives:
- the strategy to reduce low margin product seems to be working as despite the challenging FX, they have manage to improve margins and improve gross profit (margins may also have something to do with Dunlop, but they don't seem to have said too much about the profitability of that business)
- the FY EBITDA guidance of $47-50m would imply a PBT of ~$10m if we take the lower end of guidance which is actually not too bad given they are flagging this is conservative given consumer sentiment
- they generated decent cashflow to pay down some debt, but just not enough given business challenges
- they are closing/selling stores and buying this Melbourne retreading factory & Adelaide commercial site, and they are paying merely for assets & inventory....perhaps also a negative as they are not buying the business, but I'm assuming they are doing this to meet client ask in those locations for the type of services they are providing
Negatives:
- seems to be a brutally competitive industry when even a wholesaler of this scale is struggling to make it viable.....the results in FY24 don't show any significant change at least on the bottom line & for shareholders, but I wonder if this changed focus over the last 12 mths is improving the business
- they have flagged needing working capital for the dunlop distn business, the purchases and upgrade equipment.....so seems a raise is on the cards.....this is going to put a ceiling on the price until this is resolved (the dunlop communication seemed to suggest the acquisition of inventory in ~2Q25 so this is imminent)
Ann: Appendix 4E and FY24 Financial Report, page-11
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