You never know @nessy but assume they would have to say so in the trading halt if that was the case.

Sometimes you just get those feelings, however I don’t feel like this is one.

However Gerry from Playside, whenever he speaks I always get that feeling he wants to be acquired.

own SGI IRL and SM

Thanks @Tom73 & @Strawman - on my (very basic) maths for the 1/2 I don't see much organic growth? i.e. Force was effectively acquired 1/6/24. So for HYE 12/23 no Force sales. For HYE 12/24 a full 6 months of Force sales. The original acquisition announcement had Force on a run rate of $44m p.a. If you assume $22m for the half to 12/24 for Force (and that is an assumption as there may be seasonality, but I'm not sure) and take that off sales reported for HYE 12/24, it looks like the balance of the business has not grown YoY in the first half? i.e top line comparing HYE 12/23 to HYE 12/24 went from $56.5m to $71.5m - a $15m increase - from the segment note in the HYE 12/24 accounts it looks like Force (if you assume the consumer division is all Force, which from their explanation it may not be...) did about $20m of that, so balance of business was $51.5M - that is a fall of $5m YoY for the ex-Force businesses?

I think the business is interesting - just trying to understand how much organic vs inorganic growth to expect? Happy for you to correct me if I have some assumptions/maths wrong above too, btw. I'm not accounting for prior crossovers between the divisions which would impact also.

Nah, you're maths is right @rh8178 based on half on half comparisons. I just assumed that organic growth would be evident over a broader time frame. Lord, I hope so -- the thesis is shakey if the only growth is that which is acquired...

I think the business is interesting - just trying to understand how much organic vs inorganic growth to expect?

Don't expect any organic growth, but expect a lot of lofty revenue goals from management arrived at through some fairly ambitious organic revenue expectations. The growth since 2022 has been purely driven by acquisitions. I really struggle to square the valuation here with the performance to date. Especially in the small/micro cap space.

This could be a cap raise for an acquisition, or alternatively they might need to fund some inventory purchasing for their home label and that take or pay contract they have with Positec. They are carrying a fair bit of debt so if it is for WC then it's definitely more prudent given where the SP is to issue equity, imo.

You're right @rh8178, we're waiting on signs of organic growth. This has been held back by ongoing closures of unprofitable stores. Eg in FY24 revenue was reduced by $11m from store closures. And I think we can expect more in FY25. My revenue expectations for FY25 are around $150m, less than the sum of FY24 Stealth + Force revenues of $159m, because of expected ongoing rationalising of unprofitable stores and products.

On one hand this is strong action by Mike that has increased profitability. And the rocket behind the share price has been the move to profitability and optimism this will continue. But ultimately we also need to see absolute revenue growth to demonstrate that the business can take market share.

Timing for the capital raise is impressive and continues to highlight the discipline of good capital management .

I feel this raise will provide the leg room for future acquisitions or pay down debt .

Flexibility either way

Hold Small Posiiton IRL

A good issue to tease apart @rh8178 , there was negative organic growth in H1FY25 and on seeing the results I was initially alarmed. However, on closer review the drop in Industrial division revenue of $4.7m was presented as due to store closures as shown in the slide 17 below. Consumer sales (ie Force) were $22m so around half the FY24 forecast revenue projection for Force provided at the time of acquisition (slide further down).

So, on the face of it, no organic growth, but a solid improvement in the bottom line from cost controls and closing low profit or unprofitable stores. Profit was up and investors (including me) happy and growth from acquisitions works provided they are good additions and leverage the existing operations to create further operating leverage and expand NPAT% margins.

However, it looks like Force revenue may have dropped, the sales figure of $21.83m in the presentation slide 17 is revenue of $19.76m as per note B1 @rh8178 refers to. The difference will be rebates or other net sales adjustments. Based on the presentation at the time of the Force acquisition (below), annual sales for FY24 were expected to be $44m (same as FY23), so $22m for the half as pointed out. 

The unanswered question is what is the seasonality of these sales? We know that the Industrial business has higher H2 sales, but I am not sure if this has also been confirmed for the Consumer business. If so, then we are back to sales probably being relatively flat for Force for the full year.

Now back to your point @rh8178 and @Strawman concern, no organic growth is flat out bad if it continues, growth just by acquisition is high risk and unsustainable long term – not a business I want to own. However, we have had 2 organic growth drivers in play which is the only growth I have included in my sales bridge to get to $250m. The long-awaited Loyalty Rewards ($60m) and the recently announced exclusive brands deal which included CAT power tools (30m). In addition we have the Hire Tools business being launched in 20 store in stores that should improve margins and probably increase revenue but by how much we don’t know.

We may attribute the recent period of flat sales as a reflection of management distraction integrating a new division (Force) and closing 12 stores. A focused management and store expansion along with additional brands, hire revenue and loyalty program revenue gives a lot of opportunity for organic growth.

We need more good questions like these to keep us on our toes. We also probably need better answer than I have provided, so I look forward to others thoughts on this issue and whatever comes of this capital raise.

Slide 17 H1FY25 Presentation (25/2/25):

All of the fall in Industrial sales is identified as due to store closures – looks a bit neat and conflicts with a statement early in the presentation (912) that Industrial sales increased 8.8% like for like pcp… hmmm

Page 6 H1FY25 Financials:

The above reconciles the reported revenue with the sales in the presentation. Note also that Sales and Revenue are the same for 1H-2024, so it’s only with the introduction of Force that we have the difference, so the gross to net sales variance is in the Consumer division and is new.

Note B1 H1FY25 Financials:

Slide 14 Acquisition Presentation Briefing (6/6/24):

Note: FY23 revenue similar for Force (ie no growth anticipated in FY24)

Disc: I own RL & SM

Thanks @Tom73 - on the contrary that's a good and well thought out analysis and makes a lot of sense. I had seen the notes on loyalty and CAT distribution but hadn't seen numbers attributed - that looks a lot more interesting.

@Strawman it might be time to try and get another meeting with the team there for an update!

I have just re-watched the SGI meeting on Strawman from 8 September 2023 while waiting on further news.

Well worth another watch if only to re-connect with the way Mike and Chris the Chair think about the business and what they priorities in decision making when choosing how to grow.

Assuming they have not changed their spots, it's a good mind set to prepare to view whatever the announcement is around the capital raise.

Have a safe and happy Easter all.