"It is clear that growth has stalled this year, compounded by margin contaction. Gross Profit Margin is great but the cost of doing business has noticeably increased."
I wouldn't say growth has "stalled"; the top line grew by 9% in each half of FY2024, and they are cycling very strong pcp comparatives (+39% in DH2022 and +16% in JH2023).
As for CoDB, yep, that has ratcheted up, in the last two half years:
However, it warrants pointing out that this was influenced to a reasonable degree by investment in "good" costs (i.e., costs which drive development (R&D) and brand awareness (Advertising/Promotional"), which increased by a very hefty 77% in FY2024 vs FY2023.
What one might describe as "bad" costs (i.e., Employment, Administration and Other) grew by 23%, although it is certain that some of these expenses have been incurred in driving longer term growth - setting up shop in the USA doesn't cost zero, that's for sure.
So, it's bit tricky to know whether this is a mediocre, or in fact a very good-quality, result.
Glass half-empty minded folk might quit reasonably view it as a bit of a "gunnah" company.
That certain key executives have significant shareholdings makes me inclined to have a glass half-full mindset.
But the business is obviously at a critical point in its corporate evolution, and the road is littered with the carcasses of failed Australian companies that have sought fortunes in far-flung geographies, so portfolio sizing needs to reflect that.
I suspect it might be one of those situations of a stock becoming an even better investment at a price 40% or 50% higher after some de-risking has occurred.
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LBL Price at posting:
65.5¢ Sentiment: None Disclosure: Held
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