Bit of a curate’s egg from BAP.

headline numbers appear ok, given the disruption to supply lines and the COVID related lockdowns that would have impacted retail sales.

Revenue increased across all segments which shows superb resilience. EPS was marginally increased. They have increased the dividend.

However, the increase in inventory has lowered ROIC and cash conversion. Combined with the higher pay out, debt has consequently jumped by $100m.

I am concerned this looks like a company trying to maintain its attractiveness as a yield stock by increasing debt to keep a high dividend. This may not be entirely fair given much of these issues should resolve with the normalisation of supply chains and the retail environment.

I have a 5% holding in Super. I will be holding to see if these trends revert.

Darryl Abotomey has announced his retirement.

The share price has dropped by 8-9% at time of writing.

Part of the thesis with BAP, for most people at least, is the consistent steady hand that Darryl has provided. He has been a fantastic leader, with an understated approach and the shareholders as his main focus. The performance of the group has been incrementally better every year, he has overseen some sensible acquisitions, but never been too adventurous.

Announcement here

It is worth noting that BAP is once again in the top 5 holdings in Lakehouse Small Companies.

Of course the market hates uncertainty, and this announcement certainly introduces uncertainty. If the new CEO/MD can continue with the same approach, todays gyrations will represent an excellent buying opportunity.

DISC - I have a 3% holding in Super.