Judging by the price action since the results were released, the market certainly doesn't think of the result as just "OK" :)

I was too slow to complete my research and open a position sub 20c. Boo hoo!

I thought I'd throw in some quick thoughts (OK, so, not so quick, by the time I finished writing this) about Stealth's FY24 results prior to the briefing tomorrow. Unfortunately I'm unable to watch live. I trust other Strawpeople will join the briefing and provide an update here. And I'd love it if someone is inspired to fire some of my questions below to Mike.

First, thanks to all those who have already given some analysis: @wtsimis, @Tom73, @mikebrisy and @Strawman. Always great to hear a range of well considered opinions.

Also, I qualify my following thoughts by saying that although I have read through most of the summary announcements, I'm yet to comb through the Annual Report in detail.

Strengths:

1. Almost all stats have moved in the right direction. Some slower than I had hoped. But pick your favourite stat and it has most likely improved. Gotta give credit for a consistently "solid" set of results.
2. NPAT is finally starting to become meaningful at $1.4m and the FCF is strong at $4.7m. Even with the share price being a bolter in recent days ($0.30 at time of writing), the multiple is not demanding. Assuming a conservative 1.5% margin for FY25 (the very bottom end of the guidance provided by Mike), on at least the current revenue run rate of $159m (assuming no rev growth in FY25), that's at least $2.4m NPAT, and likely an even higher level of FCF. Based on these stats, any valuation looks attractive.
3. Mike like's communicating his targets and guidance. He hasn't hit his big targets. Eg the $200m rev and 8% EBITDA never looked like it would be achieved in FY25. But they have gotten closer than I expected: it is highly likely they will get at least 80% of the way there. The goalposts have now moved to FY28 with $300m and 8% EBITDA. If they can get at least 80% of the way there, then there's still enormous upside for share price.
4. I know others have said they don't need the dividend. But I'll take it. My dad has always liked his "divvies", and I'm increasingly moving in that direction. Dividends have a tendency to impose some discipline on execs. If Stealth needs money for future acquisitions, they have room with their limited debt and healthy current share price.

Concerns:

1. Like others have expressed, I was disappointed with organic revenue growth. They did close unprofitable stores that generated >$10m in revenue, although I'm not sure of the timing so I don't know what impact that had on yearly revenue (maybe a question for the briefing?). Having said that, others have used the slow revenue growth to question Mike's regular claim about Stealth products being non-discretionary. I actually think the current results support MIke's claims, or at least don't discredit his claims. Non-discretionary doesn't mean growth, it means stability. In a challenging economic environment they have been stable, and shown growth greater than competitors and many other non-discretionary retailers.
2. I'm still uncomfortable with the Force acquisition. Communications about "diversified conglomerate" and "one business: two divisions" don't fill me with joy. Mike has probably done as much as he can to convey his confidence in the acquisition, so I'm not expecting any new insight to convince me. So it's just "wait and see" if efficiencies and synergies flow through to financials.

Questions:

1. How will the Force acquisition likely impact margins in FY25? Is it reasonable to judge effectiveness of Force acquisition from FY25 financials? Or will there be a short-term negative impact of the acquisition?
2. The investor presentation mentions >$10m drop in revenue from store closures. When did they occur and how did that impact FY24 revenue? Also, was there any Force revenue included in FY24 reported revenue? These changes don't seem to be factored into the "underlying" FY25 revenue run rate of $159m which seems to be the sum of $114m FY24 Stealth revenue plus $45m in revenue from Force.
3. Mike has previously flagged a high margin $60m boost to revenue from acting as a bulk distributor for preferred suppliers. Some of that was expected in FY24, but it seems it hasn't yet arrived. Is this channel for growth still being explored, and if so when might it start to impact revenue?
4. What should investors expect in terms of future dividend frequency and payout policy? The FY24 dividend was about 20% of FCF and 70% of NPAT. Can either of those stats be used as a rough guide? Will dividends be considered half-yearly or yearly?

OK, that's enough for now. I'm still bullish with Stealth and it is my largest holding on SM and IRL. With recent share price increases I have been offloading a little but that's just because my position has become too large for my comfort levels. It's still my highest conviction holding.

Sorry again for my relative absence on SM these days. Just too busy with work after having sold my tech/consulting business last year. But I still love the community here and I will be back in force in the not too distant future hopefully. Straw on!

I agree @Strawman and @mikebrisy that “Ok” sums it up and with your comments, some of which I will repeat in my key take aways but will add that I am on the good side of Ok:

Sales: the week organic sales growth is a concern and challenges the “95% of products are non-discretionary” line Mike has used over the last few years. The annualised pro forma sales with Force added of $159m is as guided and provides the growth needed. However, we now have the SGI business with little/no growth (it fell $1-2m short of the FY guidance given in June) and Force which has had no growth, so the only organic growth I think we can expect in the top line for FY25 is whatever portion of the $60m organic revenue capture falls into the year.

GP Margins: up 0.3% to 29.6% YoY are holding up at levels around the last 3 years. Mike is focused on EBITDA% which is the right approach, Force may provide some GP% improvement but the 60m organic revenue is likely to detract from GP%, so long as the EBITDA% impact is positive then all is good.

EBITDA%: 5.3% up from 4.8% (Continuing Ops) good to see, personnel expenses ticked up 0.2% of sales, but other expenses dropped -0.4% of sales which added to the GP% improvement of 0.3% gives the total EBITDA% increase of 0.5%. This shows a small taste of the operating leverage expected for the investment thesis rests on, slow and steady, good cost control in the face of inflation and basically flat sales.

Investment Thesis: I wanted to see top line growing and that being leveraged on the bottom line for high % growth in NPAT each year, and we are seeing it – slowly as the 5 year data below shows but this years around 50% increase in NPAT is something I am looking forward to seeing for a number of years. If this becomes a patten then on a stable PE the returns will be excellent, but PE expansion with an excited market is also a strong possibility. Thesis intact.

Dividend (0.84cps): Mike promised a dividend and has delivered. While I am not looking for a dividend and ascribe to the “don’t give me the money if you can invest it well” view of dividends, in this case I think it has some merit. It provides some capital management discipline and to date SGI has been very focused and astute at managing debt, working capital and capital raises during growth, both organic and via acquisition. Also I would rather a management with skin in the game take some money off the table via a dividend rather than selling down some of their position.

Balance Sheet: Net working capital (ex-Force) continues to fall (down $2.4m) which shows good business management and underpinned strong operating cash flows +$6.3m. Net debt of $10.8m is up on $7.2m last year but the Force acquisition is the driver and we have seen this playbook from SGI in previous acquisitions where they drove down the debt efficiently.

In general, the results came in around expectations, but I am impressed with the cost control and working capital control shown in an environment many businesses point to inflation as a reason these have blown out.

The Force acquisition makes looking forward and comparatives tricky but I subscribe to the @mikebrisy model of consolidated expected results and agree the timing is up in the air, but potential value looks solid.

PS: it wouldn’t surprise me the if the time of release was partly due to a time zone stuff up with WA being 2 hours behind… just a thought!

Disc: I own SM+RL

@Strawman "OK" about sums it up, however, I am perhaps more on the "meh" side of "OK".

I'm sill looking for signs of the incremental $60m of revenue opportunity within the scope of their current customer base, that Mike has said repeatedly since introducting the idea (a year ago?) that they can capture at relatively low cost. Admittedly, at 1H he said they'd culled some lower margin revenues, so perhaps part of this offsets the initial capture of the $60m opportunity. If so, this perhaps is reflected in the increasing EBITDA margin.

Once more, a little M&A muddies the waters of a clean set of books, albeit not too badly.

But, looking at my pro forma analysis from 6 months ago, they are well behind where I had projected them to be. Admittedly my analysis drives a significantly higher valuation than the SP today... so there is a fair margin of safety.

I am content to hold at my current position, but am putting them on a "watch". My thesis requires reasonable organic revenue growth at a high incremental EBITDA margin. I need to see that showing through over the next two reporting periods, otherwise there is no substance to the thesis and I'd have to question why I cotinue to hold. However, that is for another day.

Disc: Held in RL and SM