I find that they have been doing a decent job, at reaching such a level of free cash flow, despite a significant sales decrease. During H1 24, they had a free cash flow (after lease) of 1.8 m NZD (around 1.6 m AUD) which corresponds to an annualized free cash flow yield of 14 % (with a share price of 54 c). They also had a cumulated 3.4 m NZD free cash flow during the last 3 quarters.
Also interesting to remind that there is a link between the large decrease of their sales and the significant improvement of their gross margin : - in FY 23, the company mentioned that they stopped some low margin businesses, - they also increased prices which may have affected their top line.
The improvement of their gross margin during Q2 24 was so significant that it fully offset the sales decrease (- 12.5 % yoy for Q2).
STG Price at posting:
50.0¢ Sentiment: None Disclosure: Held
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