"..good result I agree. I guess the positives were the strong global products revenue, the improvement in distribution result, and the continued v. successful progress of a well articulated strategic plan. The group's profit growth was mostly due to distribution with the revenue growth re-invested in higher expenses including marketing and R&D."
The result was deceptively strong, the highlight for me being the near 300bp increase in the Gross Profit Margin, to 35.7% (pcp = 32.9%), which is essentially an all-time record for the group (even when one goes back to the days when the company still had the Keurig distribution agreement, which was effectively on a 90%-plus GP Margin, as CoGS were negligible).
So here is clear evidence of the company's R&D strategy of recent years generating an excellent for shareholders.
The reported result was masked by some significant cost investment ahead of the Revenue curve (i.e., what are often called "good" costs, i.e., those that contribute to driving revenue growth), i.e., in Advertising and Marketing (up a whopping 43% on pcp), Occupancy (up 39% on pcp), as well as R&D costs, which also increased faster than Revenue.
I estimate - even if one was conservative in normalising these increased expenditure - that the growth in underlying EBIT result was more like 25% to 30%, compared to the 12.3% growth that they reported.
This is a business that has some serious momentum behind it, and this result seriously understates that momentum, in my view.
I saw one report from a broking "analyst" that was forecasting earnings growth of sub-10% pa over the next two years.
(20min delay)