Ann: Trading Update and Capital Raising Presentation, page-36

I tried to understand the execution of their plans myself as I was close to buying in when this all broke loose.

I started with the following table:



Across the last 5 years revenue has expanded as per the plan.

They seem to have managed to hold their GP margin steady although a bit more of that in a moment.

Despite their improved sales, their Net Profit and Net Profit margin (Net Profit to Sales) has reduced significantly across this period as has their Return on Equity.

I suspect one of their issues is the massive increase in marketing expenses which is probably an essential component of making deals with the big retailers.

It could be argued, perhaps, that the Marketing costs could be a cost of sale in part at least thus, bringing into question, the steady GP margin.

I looked at BRG (Breville) who manufacture product that is sold into large retail organizations, and so may be considered as having a reasonably similar business model, and they usually offer a Return on Equity of 15% to 20%. Their advertising costs represent about 6% of their revenue whereas the BWX number, although not clearly indicated in their reporting is probably around 15% of revenue.

At the end of the day they had to rely on their Cash Flow and Profit forecasting against the backdrop of constructing a new manufacturing plant and building revenue share with a new approach to marketing and all the time staying inside the covenants set down by the lenders.
They then had to deal with COVID, supply chain issues and rising interest rates so those forecasts had to be right on the money.

I'm guessing they weren't.