@Usman1
Here is what has been quoted:
" Farm Pride Foods Limited (FRM) Reported a solid set of results with revenue growing 2.5% to $49.2M. Operating EBITDA margin expanded to over 16% as EBITDA grew to $7.9M. This drove a 13% increase in NPAT to $4.3M on the back of reduced interest costs and a flat tax rate. EPS grew 13% to 7.81 cents. The company finished the period with $3M in cash with no debt. Adjusted operating cashflow conversion was not as strong as in the PCP at just under 78% of EBITDA. The company attributed poorer cash conversion to an increase in inventory (eggs) and investment in biological assets (hens). As discussed above, the company noted a forecast surplus of eggs in the final months of the year on the back of greater certainty concerning the definition of free range eggs, driving an increase in industry production capacity."
Firstly to the "solid results" on the basis of revenue growing 2.5%. Why this would be something to
write home about, when in the last 8
full financial years sales revenue have fluctuated anywhere from over 4% growth to over 4%
contraction, in equal measure, is beyond me. An that's for
full financial years. How much volatility there me be in
half year period, which the above quote refers to, is another matter. And it is especially underwhelming in the light of an industry that has such "wonderful growth tailwinds", as frequently trumpeted by enthusiasts here.
Secondly, to the "solid results" that resulted in operating EBITDA "growing to $7.9m". Well here's the thing, after we exclude the effect of PPE writedowns from the prior period, EBITDA did not grow at all. In fact, it
shrank moderately. So how this could be labelled as "growth" in
operating EBITDA, is frankly beyond me.
But it gets worse. You see, the reported EBITDA is constructed after expensing flock amortisation charges. But if instead of subtracting a relatively arbitrary amortisation expense, we were to subtract the actual cash flock replacement expense, we would get a rather greater
contraction of about 12%.
Hello? Growth? Margin
expansion? Really?
And this from a financial professional? It's either spectacularly stupid or borderline negligent.
It beggars belief that there are people here on the FRM tag, who hover around lapping up every bit of good news, but are completely silent to glaring nonsense such as this. I would posit that if we want to get to know a business, as potential or actual investors, then we cannot just be like monkeys in a zoo enclosure, scampering off to grab every peanut that is tossed our way and swallowing it whole without at least first giving it a bit of a sniff.
