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.