NZ earnings cont.

27 May 2024

NZ earnings cont.

My Food Bag (my food bagholders) — revenue down 7.7% compared to FY23, npat of $6mn. As I’ve been saying from day dot My Food Bag suffers from a lack of TAM and thin margins (total active customers v.56.8, a slight deceleration from 57.5k the previous period). Tiny 3% NPAT margin. There’s been a bit of debate on FinTwit over the great big daddy of all the meal kids – Hello Fresh — the stock has traded one way (down). I don’t like HF for the same reason I don’t like MFB — lack of margin, small TAM, and scrambling to sell bargain boxes feels a bit last ditch…

Ryman — finally showing weak signs of turn-around after a well deserved pummelling by the market. Total revenue up +18%, but gosh, a lot of impairment charges and asset write-downs ($262mn or so)…Taylor Swift once asked “are we out the woods?” — I think not yet. Oceania looks a bit better — $85.4mn in operating cashflow — but still debt an issue. Until interest rates come down (not betting on this year, kiddo) expecting the retirement operators to remain unimpressive. Speaking of the operators — what about Arvida (ARV)? Trading deep and dirty and 0.97c — how does that $1.70 NBIO offer the board received last year look now? I’d suggest it looks quite good…tasty…

Potentia — Has bought a +18% stake in Vista, which makes software for cinemas (they make it so you can have a giant cocktail delivered to your chair as you watch Marvel Avenger Heroes VIIIIII). No takeover yet but never say never… Are cinemas back? Maybe?!

Carlyle — in the “why bother listing when private equity can buy you?” Box — the recent sale of fuel retailer NPD— Carlyle backed a $128mn chunk of debt to allow current 10% shareholder Barry Sheridan buy the remaining 90%. Another example quiet high-achieving business that could be listed (lots of woulda shoulda couldas…)

RAK — our favourite stock has results this week … expecting weaker results given continuing slow-down in the telecoms sector. New satellite contract is a win. AI chip is a win and I don’t think the implications are fully understood yet. On a peer basis RAK trades on very attractive multiples and that NBIO is still in play…

Skincare

Those who read this will know I have an enduring fascination with Estée Lauder and companies like EL. The why is very simple — for a long time EL could command very high margins and enjoy extreme brand loyalty. It was a great business as a result. Now it is less good of a business — it made some acquisitions it thought was good at the time — it ended up overpaying (oops) and now each quarter is a lesson in shareholder disappointment. The biggest thing that has happened since the good old days of charging a million dollars for some cream is the advent of easy to access active ingredients (i.e. The Ordinary, which EL actually owns) — the second biggest thing that happened is Korean skincare (go to a branch of Hikoco … there’s one off Queen st… and watch both how efficient it is and how busy it is). But there’s still some companies that do well off skincare — in fact, maybe EL is the worst of the bunch now.

Anyway – did you know that Unilever has a beauty division? (When it’s not out promoting ‘woke’ mayonnaise). Unilever Prestige, its (you guessed it) prestige beauty division, is defying the beauty downturn — reporting sales growth of 7% for FY23 — to put that into perspective, Prestige had 700mn euro in turnover for 2020. Turnover for 2023 was 1.4bn. As always – the devil is in the detail – Prestige owns the ultra-popular Tatcha range, as well as Hourglass and Dermalogica. Unilever’s M&A record is mixed at best (remember when they bought Dollar Shave Club for $1bn and then sold it to PE after recording a +$200mn write-down on it.

Still a long way back to redemption for EL…as for Unilever, it shows how a small product family can create outsized results … much harder when you are a Goliath. And even if you have a small selection of “ultra premiums” (i.e. Puig) you still are going to need the market of the value of your portfolio — recently listed Puig is trading in at 26 euro zone…a tiny 8.2bn baby compared to the +$380bn of LVMH.