Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- McPherson's Ltd (ASX:MCP, Financial) reported strong operating cash flows, supported by improved inventory management.
- The company ended the year with a strengthened balance sheet and $14.1 million in net cash.
- Core brand sales outperformed other brands, showing notable improvement in the second half of FY24.
- The divestment of the Multix brand has strengthened McPherson's balance sheet and simplified its business model.
- The company is now a pure play health, wellness, and beauty company, focusing on its five core brands with significant growth potential.
Negative Points
- McPherson's Ltd (ASX:MCP) reported a significant statutory loss due to material nonrecurring items incurred as part of its strategy reset.
- The company will not be paying a dividend for the second half of FY24 due to the loss this year and previous years.
- Revenue declined by 6.8% to $144.6 million, largely reflecting the decision to exit nonstrategic and agency brands.
- Underlying EBITDA was negatively impacted by foreign exchange and portfolio brand performance, declining by $4.5 million to $7.7 million.
- The company retains a residual shared cost base following the divestment of Multix, which it needs to address through a new route-to-market strategy.
Q & A Highlights
Q: Can you elaborate on the return on investment from increased A&P spend for core brands in the second half?
A: Brett Charlton, CEO - The increased investment in brands was welcomed by customers and allowed for more effective promotions, contributing to improved performance. However, the replenishment from supply chain issues in the first half also played a significant role. We are confident that continued investment in A&P will yield positive returns.
Q: Do you have data on market share movement for core brands in the second half?
A: Brett Charlton, CEO - Market share data varies by category. While we are the number one player in categories like Manicare, Swisspers, and Lady Jayne, we have lost some share to private labels. Increased investment in A&P should help us regain and grow our market share.
Q: Given the net cash position post-Multix divestment, what is the timeline for implementing a new distribution model?
A: Brett Charlton, CEO - We aim to implement a new distribution model within this year to have a clean set of results for FY26. The Board is holding cash to ensure we can cover the costs of this transformation, which is crucial for releasing residual costs and investing in our brands.
Q: Will ERP investments be delayed due to the current focus on transformation?
A: Brett Charlton, CEO - Yes, ERP investments will likely be delayed until FY26 or FY27. We are currently focusing on data cleaning and ensuring readiness for when we do implement the ERP. The goal is to de-risk the business by replacing end-of-life systems at the right time.
Q: How did the divestment of Multix impact the financials and what are the next steps?
A: Mark Sherwin, CFO - The divestment led to a net cash position of $14.1 million and improved operating cash flows. However, the continuing operations retain a residual cost base, which we aim to address through a new route-to-market strategy. This will help us remove these costs and improve profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
