Hey @thunderhead, apologies I have been slack keeping my thoughts on some companies up to date. KME has been an exceptionally frustrating hold obviously but the headline numbers have masked the progress of the underlying business although no doubt there have been some operational mis-steps along the way. I will try and do a more detailed Straw in the near future.
In short though, we are in a micro cap market that is demanding growing profits from companies. KME has not delivered that for some years as they have invested in various strategies but the commentary from Storm was that FY23 would be a year where we saw the scale start to emerge. Of course that didn't happen in 1H23, Tutorfly's negative contribution the main reason but even beyond that the Corporate centres have not delivered the profits you would hope given the greenfield roll-out paused in the half.
The presentation that was released with the report shed some light on this, I think the "breakeven" where a Corporate centre becomes economically more attractive than a franchised one is quite high. It appears to be around 140 students, and although there was a graph that showed established Corporate centres are at 168 students it wasn't broken out how many of the 26 are considered established. That same graph showed the average franchised centre has 75 students, leaving a large gap to take an average franchised centre to a profitable Corporate one and may take longer/cost more than expected.
That said, I don't consider the Corporate strategy a failure and I think it's a vital part of the business moving forward. In the Strawman meeting Storm said a key part of the Corporate strategy is having a platform ready to go to purchase centres from retiring or departing franchisees especially in regions where it can be difficult to find a new buyer quickly. An established Corporate centre platform can also be used to turn around underperforming centres before being re-sold.
As frustrating as it has been, it does appear as though the 2H will be much better and Storm alluded to that on the call. They have given trading updates/guidance prior to the FY results in the past, so hopefully don't have to wait too long to hear how things have progressed.