Stealth Global Holdings Ltd (ASX: SGI) (the Company or Stealth) a leading wide-range provider of industrial supplies and solutions for every workplace, is pleased to announce it has finalised its year end process and confirms record results for the year ended 30 June 2023.
Highlights: Another year of Record growth
|FINANCIAL SUMMARY||FY2023||FY2022||% Change|
|Earnings before Tax||$1.3m||$0.7m||85.70%|
|Basic earnings per share (EPS)||0.91||0.6||51.70%|
|Cash and Debt|
|Free cash flow||$5.6m||($0.4m)||$6.0m|
|Cash and cash equivalents||$7.7m||$4.7m||63.80%|
|Price-Earnings Ratio (PE)||13.8x||16.7x||17.40%|
|Return on capital employed (%)||9.90%||6.00%||390 bps|
|Inventory / Sales||13.30%||14.20%||90 bps|
|Net debt ratio / EBITDA||1.4x||2.6x||46.20%|
Mike Arnold, Group Managing Director & CEO commented: “Stealth’s final audited results for FY2023 confirm another record year for the Company with strong growth in revenue, cash flow generation, reported earnings, and also earnings per share. We are now seeing the benefits of our strategic investment in building a stronger, larger, more relevant and diversified industrial supply business over the last three years.
“The positive earnings performance has also translated to a strengthened balance sheet with lower net debt and increased funding capacity for new growth initiatives. The Company has delivered annual compound growth rates of around 30%+ in revenue and earnings over the last three years, with an improving return on invested capital. This has demonstrated our ability to invest profitably in the business, and we are confident Stealth is very well placed for this growth momentum to continue.
“Stealth’s second half financial performance was stronger than the first half, and we see healthy ongoing demand in the Australian industrial consumables sector despite cost pressure being evident across the broader supply chain following the interest rate increases during the last 12 months. Stealth has responded to the rising inflationary pressures with a reviewed pricing strategy, which is anticipated to not only protect margins and earnings but has the potential to contribute to future profit growth.
“Stealth will continue to execute its growth strategy in a disciplined manner and is targeting ongoing growth in revenue and earnings in FY2024, along with the declaration of a maiden dividend to shareholders for the period ending 30 June 2024.”
Stealth delivered a record financial performance in FY23. Revenue of $111.0m was up 11.4% from the $99.6m contributed by continuing operations in FY22. This was achieved across business, geographical, trade and consumer markets and was after the Group exited unprofitable customer contracts during the year that reduced revenue by $6.3m. At $58.6m Group revenue in the second half was 11.8% greater than the first half.
FY23 Gross Profit was $32.6m, up 8.3% from $30.1m in FY22, with second half Gross Profit 14.5% higher than the first half. This uplift in Gross Profit reflected the Group’s actions focused on pricing reviews and initiatives to counter the impacts on rising inventory costs on customer margins, including fixed-price contract expirations. The improved operational performance was reflected in double digit growth over FY22 across three key metrics:
Operational Key Metrics3
|FULL YEAR 2023||% Growth v Prior Year|
|Sales per day||14.9%|
|Sales value per order||17.4%|
|Sales per employee||19.6%|
|Gross Profit per day||31.3%|
|Gross Profit per order||14.2%|
|Gross Profit per employee||36.7%|
3 from distribution and retail operations, excluding buying group operations.
EBITDA1 was $5.3m, an increase of 32.5% year on year (FY22: $4.0m, from continuing operations). EBITDA margin improved to 4.8% from 4.0%. Contributing to the improved margins was a 6.5% reduction in the Group’s expenses as a percentage of revenue (down to 24.5%). The Group’s strong performance in the second half saw it achieve an increased EBITDA margin of 5.2%.
The Group achieved a record Statutory Profit After Tax of $0.9m (FY22 $0.6m), an increase of 50.0%. The strong FY23 performance resulted in record Earnings per Share of 0.91 cents, up 51.7% (FY22: 0.60 cents).
Stealth’s successful growth performance has been driven by investment in e-commerce, and strong customer relationships as well as synergy benefits from the execution of the Company’s acquisition strategy. Unification investments have enhanced the organisation, driving volume growth, broadening product selection, enabling cross-selling and increasing customer value.
|CAGR (Compound Annual Growth Rate)||3-YEAR CAGR4|
4 from continuing operations.
Stealth’s positive earnings performance has also translated to a strengthened balance sheet with lower net debt and increased funding capacity for new growth initiatives.
The Group recorded operating cash inflow of $6.8m, up $5.9m on FY22. Net cash outflow related to investment excluding acquisitions was $1.2m (FY22: $1.3m excluding acquisitions), primarily on capital expenditure and investment in e-commerce and other intangible assets. This translated into positive free cash flow of $5.6m (FY22: $0.4m outflow) supporting net debt reduction and the Company’s proposed dividend policy.
Net debt was reduced by 29.4% to $7.2m. Approximately $5.2m of this related to a revolving working capital facility, with the remainder related to corporate acquisitions completed over the last three years. The Group repaid $1.6m of acquisition-debt in FY23 with C&L acquisition-debt ($2.5m gross funding in FY21) to be completely repaid as of December 2023.
Cash on hand was up by $3.0m to $7.7m at 30 June 2023. The Group increased its capital management capacity through an additional $3m of working capital finance facilities secured with CBA during FY23, bringing total facilities to $19.1m as of 30 June 2023. Total unused funding facilities at 30 June 2023 amounted to $4.1m, providing support for continued investment in organic growth and other strategic growth initiatives.
Stealth remains well positioned to continue delivering growth despite a global economic outlook that remains uncertain. The very nature of the large, fragmented and highly attractive MRO industry the Company operates in, the everyday workplace items it sells, the broad collection of industries the Group sells products into, underpinned by the depth and diversity of product range, customers and repeat business activity is expected to provide a steady flow of growth and opportunities over the coming years.
Activity in resources sector is strong, Stealth’s branch store presence in Western Australia and Queensland means it is well-positioned to benefit. It can also support investment being made in roads, infrastructure, housing, building, construction, transportation and vehicle sales (repairs & 4wd fit out).
Further consolidation of operating banners in FY24 provides significant untapped revenue and cost synergies. Along with promising strategic opportunities, this is anticipated to result in outperformance in the wider industrial sector.
Capital investment will be directed at supply chain efficiency, rightsizing, channel growth, new services, merchandising, store network expansion, enhanced digital channels (including AI), and improvements to store and distribution centres.