Fundamental Analysis, page-14

Operating Costs were increased by ~33% from $1,936,333 in the previous quarter to $2,576,353 in the most recent quarter, while Receipts were only increased by ~4% from $4,893,306 to $5,079,142 during the same period. These changes, especially, contribute towards a Change in Profitability of ~-3% (the first quarterly decrease in Profitability for more than a year). The impact of several systemic shocks to the industry on the most recent quarter are easily overstated in explaining these results (particularly in the case of increased Operating Costs, wherein the impact of recent fuel price and inflation increases is clearly observable). Perhaps of greater impact, though, was the overperformance of the previous quarter, which delivered a Change in Profitability of ~6% despite unfavourable seasonality (this is only observed in hindsight when costs relating to the Parton Wines acquisition are assigned in equal proportions to the first and second quarter of this year).

The impact of the most recent quarter's decreased Gross Profitability (which, crudely, is the result of the subtraction of Operating Costs from Receipts) on Net Income, however, is significantly alleviated by the cost-saving initiatives associated with the 'Project One' integration. Specifically, these initiatives have resulted in a ~4% decrease in Staff Costs from $3,740,203 to $3,577,718 (the first quarterly decrease in Staff Costs for more than two years) as well as an ~18% decrease in Administration Costs from $395,611 to $324,674 during the same period. A similar decrease in Operating Costs may have been afforded in this way had it not been for recent fuel price and inflation increases but this cannot be ascertained without more information.

Looking forward, the company has stated that the full effect of the aforementioned cost-saving initiatives will be demonstrated in the next quarter. This effect, paired with more favourable seasonality and increased spending on more cohesive marketing, will significantly impact the next quarter's Profitability. Because of this, I will refrain from estimating when the company will become profitable as next quarter's Income to Costs Ratio will likely then be unpredictably higher than that of this quarter.