"Key points for me:
- potentially highest second half sales ever?
- EBITDA looks soft half on half because H1 included $3.2m of government stimulus compared to $0.7m in H2.
- GM margin looks v. Soft. Based on sales growth being higher in CC than headline going to assume this is driven by currency. Tbh I haven’t followed the AUD very closely in recent times and cannot remember what it was back in H2 FY2019 when they achieved gm of 64%."@Klutch,
Was indeed a record Revenue half:
View attachment 3498128And yes, the GP Margin of 59%, was lower than recent halves (no surprises there given the A$ delta):
View attachment 3498143As you infer, it's hard to discern the underlying performance of the business given Covid continuing to distort demand for SDI products, not just in absolute terms, but in terms of the normal 1H/2H seasonality.
Then at the CoDB lines, the second half was assisted by $0.27m recovery of impaired receivables (kudos to SDI's credit department; that, or the CFO was unduly conservative in raising the bad receivable provision).
On the other hand, there was a rather large $0.5m increase in R&D expense in JH21, which more than offsets the recovered receivable credit (And that R&D expense jump wasn't off a depressed JH20 base - JH20 itself reflected an elevated R&D P&L cost compared to history:
$mDH18: 0.63
JH19: 0.37
DH19: 0.90
JH20: 0.87
DH20: 0.85
JH21: 1.34
So it looks like they are increasingly expensing R&D expenditure over time, which I like because while it holds back short-term earnings, it slows the expansion of the balance sheet and thereby boosting long-term ROE.
So, overall, this result reflects a business clearly still not anywhere near steady-state conditions, but in terms of the quality of the result for the past half-year, I think the accounts are being quite conservatively struck, with the true PBT result (ex-NRIs) probably being some 4% or 5% better than the reported figure.
The other major feature of the result I thought was the $3.5m replenishment in Inventory over the past 6 months to a record $21.5m, from CY2020's run-down levels, which I think speaks to management's view of positioning the business for what it sees coming down the sales pipeline. (Oh, and despite the $5m investment in total working capital, the company still generated $1.6m in Operating Cash Flow for the half.
Oh, and that they not only made a profit in Brazil, but almost generated EBIT (2H, annualised) to Assets of 18%.
And, if you'll indulge some accounting alchemy, an
infinite ROE in Brazil given that business is now carried with negative Net Assets.
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(20min delay)