So, after meeting or exceeding the targets of the previous 3-year plan a year early(!), SNL’s board and management have set another 3-year strategic plan (Plan to 2022).
Under “Plan 2022” they expect Revenue in FY2022 to be $150m, at similar profit margins as today (i.e., around 10% Profit Before Tax Margin).
That implies 3-Year prospective CAGRs for Revenue and PBT of, respectively, 6.6%pa and 6.9%pa.
To put that into some context, over the past 13 years (i.e., back to 2006, which is as far back as I have captured SNL’s financials) CAGR for Revenue has been 10%pa and for PBT it was 25%pa, testimony to the meaningful operating leverage in the business.
So the Plan 2022 expectations look decidedly light-on compared to the company’s history.
Not only is the top-line predicted, according to Plan 2022, o grow at a much slow rate than in the past (the only time SNL’s Revenue grew slower in any rolling three-year period than the 6.6% pa rate being implied by Plan 2022, was during the 3-years ending in FY2009 - which was the GFC year - when it averaged 5.2%pa and in the 3-years ending in FY2017, which was the year of the disruptive relocation of the company’s core operation from the central coast of NSW, to Sydney), but it is also being suggested that, for some reason, the P&L will suddenly cease to display any operating leverage.
Here are some of the precedent figures:
Rolling 3-Year REVENUE CAGRs for the Year Ending:
2009: 5.2% pa
2010: 7.7% pa
2011: 9.3% pa
2012: 14.6% pa
2013: 16.2% pa
2014: 17.2% pa
2015: 12.0% pa
2016: 8.9% pa
2017: 6.3% pa
2018: 9.5% pa
2019: 12.4% pa
2022 (Projected):6.6%pa (?!), as implied by Plan 2022
Profit Before Tax Margins
2006: 2.0%
2007: 1.6%
2008: 5.6%
2009: 5.5%
2010: 5.5%
2011: 7.2%
2012: 9.3%
2013: 9.6%
2014: 10.5%
2016: 9.5% (Running duplicated distribution centre infrastructure)
2017: 7.9% (Running duplicated distribution centre infrastructure)
2018: 10.5%
2019: 10.0%
2022 (Projected):10%, as implied by Plan 2022... so suggesting no ability to further fractionalise fixed costs despite a further >20% increase in the top-line.
Based on the above look at precedent performance of the business, I think it is fair to say that the Plan 2022 projections are hardly demanding targets.
In fact, I’ll eat my own children if the stated expectations don’t once again get beaten quite thoroughly.
And I wouldn’t in the least be surprised if they don’t once again hit their targets a year early.
Given the significant investment in capacity and growth, the company’s manager are certainly laying the foundations for doing so.
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