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#FY22 - Lousy Performance
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Added 2 years ago

The bald fact for investors in NTD for FY22 is simply this:

 Revenue increased by 20.9% to see diluted earnings per share fall by 57.8% AND net cash from operating activities falling by 47.8%.  

 I don't think anybody can take comfort from this result and the 2HFY22 was a shocker. Management must wear the can on this and whilst eleven reasons can be advanced for the poor results, the simple matter persists, they were too busy “acquiring assets” than running the core business – a fact they have partially admitted on page four of the report. Put simply, they took their eye off the ball which is a ‘no-no’ in Business 101 and Peter Ludemann, you are looking like a reincarnation of Pacman himself, Peter Smedley of Colonial Mutual infamy (17 acquisitions in 8 years – many of them disastrous).

 Not only that, by over focusing on ‘acquiring assets’ at a time when they were making a difficult digital ERP transformation, they failed to extract the synergies from past acquisitions. Sure, it makes for a warm ‘feel good’ motherhood statement that the ‘synergy’ opportunities still exist, but, is this the team to do it? Time will tell.  

 Right now, it is extremely difficult to know whether the “acquired assets” in FY22 represent good value for money. For mine they over-reached in FY22 and now it’s time to hunker down and properly digest the new acquisitions.

 Yep, management, it’s time to get back to the basics of business and bed down the businesses acquired, streamline logistics & procedures, extract those synergies and reduce debt which at 53.3% of net debt to equity is too high in a rising interest rate cycle.

  Of course it has been a tough year and a tough marketplace and acknowledgement of the following matters is made – but, the job of management is to identify the problems and solve them.

 NTD had a shocker of a FY22 for these reasons:

 1.     Supply chain disruption

2.     Pandemic lockdowns

3.     Higher COGS because of (a) freight (b) penalty demurrage (c) unfavourable AUD

4.     Lower consumer confidence

5.     Relocation costs re warehouses

6.     Costs of digital transformation (which are ongoing with no signs of a successful outcome)

7.     Higher people costs

8.     Lack of extraction of synergies

9.     Lack of management focus and poor execution

10. Fierce competition

11. Absence of significant points of difference over competitors

 I remain to be convinced this team can do it and the Outlook Statement on page 6 is a bit wishy-washy for mine, but at least they don’t infer more acquisitions.

 Side note to sloppiness: Page 6 on the Outlook states – quote – ‘no final dividend will be declared for FY22’ and given they have declared a FINAL of 1.5c one can assume this must have been a line ball decision to pay same. Personally, I would have liked the $2m approx. to go towards debt reduction.  

 Not happy with this performance – easily the worst of my shareholdings, though ADH run them close - and I will wait to see forward progress in 1HFY23.

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Valuation of $2.00
stale
Added 3 years ago
FY21 18c FY22 15c FY23 18c Take 15c as starting point. Growth assumed at 5% for 3 years then 4% 12% discount rate = $2.00
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#FY21 Guidance
stale
Added 3 years ago

Company announcement of 28 July 2021:

Brilliant result: FY21 eps @ 18c - means they came home stronger than 1h 8.37c v 9.33c. Good chance of an increase in the Final Divvy to 4c making 7c for the year. Grossed up for the FC's that's phenomenal.
?Good to see the company taking an educated guess at FY22 with a 15c eps (caveats issued re Covid, of course - and judging on NSW they may come into play). And if one take a Hubble telescope out to FY23 when the synergies of Tyres4U kick in we will be back to the 17c-18c mark.
?The Balance Sheet is in good nick too with $29m in cash and net debt at $15.7m

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#H1FY21 Results 23/2/21
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Added 3 years ago

1H21 includes 5 months ownership of Tyres4U (Australia and NZ). FY21 Revenue is on track to reach about $460m – 1H21 Revenue of $212m with Group revenue (ex Tyres4U) up by 19% on pcp.

1H21 Operating EBITDA1 of $15.4m compared to $5.0m in pcp. Over 50% of this improvement came from NTAW business units (ex Tyres4U). Tyres4U maintained its 4Q20 EBITDA momentum.

1H21 Gross Margin up to 28.4% from 27.0% in pcp with less discounting and favourable FX. Tyres4U margins consistent with Group margin.

Strong balance sheet with Net debt of $18.2m at 31 December 2020 (Cash = $22.2m and Bank Debt = $40.4m).

At 31 December 2020 Net Assets: $83.9m, Net Tangible Assets2 : $64.3m. Net operating cash flow was up on the pcp. Fully franked interim dividend of 3.00c declared.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02344863-2A1282278?access_token=83ff96335c2d45a094df02a206a39ff4

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