22/02/2020
Laserbond took a bath yesterday, closing 22% down after the release of their half-year results. At a glance:
- Total Rev: $11.255m (up 7.3%)
- Services: $6.894m (up 21.1%)
- Products: $4.361m (down 9.1%)
- Tech: 0
- NPAT: $1.156m (down 2%)
Looking at that alone, it is a big miss given recent margin expansion and NPAT upgrades.
The Elephant:
Management flagged 'timing' as the main reason behind the lower product sales - "later than anticipated delivery of key customer contracts in our Products Division". Whilst rev in this vertical was down, orders received were up ~2% with "further growth expected in the second half".
The previous miss in 2HFY19 in the Products Division was due to prioritising the Technology Division sale as it obviously had corresponding consumables attached to the contract. Perhaps Laserbond are having some teething issues keeping up with the growth curve? With this is mind, a new lathe came online in Jan 2020 (increase capacity and efficiency), March 2020 will see a CNC grinder installed (increased productivity and margins) and management flagged further plans for additional upgrades.
I feel as if management are investing in the right areas, but I would like to see growth in one vertical not come at the expense of another.
Overall:
Management stood by the 2022 target of $40m in sales, double-digit rev growth in both the Services and Products Divisions and gradual margin expansion. They basically have their target of one Tech sale in the bag for FY20 and a new tech-focused sales rep now online with the goal of 2 Tech sales in FY21. I think a ~20% SP decline was rather harsh but when multiples are inflated across the board, any perceiving miss will do that. My $.78 IV remains and likely wont be increased until I gain confidence in management's ability to grow multiple verticals simultanesouly.
Original announcement here.
