SKL Skellerup Holdings

[Left Field]

Nice result for holders - Industrial Division's performance impressive in drive to improve margins.

https://www.nzx.com/announcements/397133

Highlights for the year ending 30 June 2022
• Strategy continuing to deliver substantial growth in earnings and returns to shareholders.
• Revenue of $316.8 million, up 13% on prior comparative period (pcp).
• Earnings before interest and tax (EBIT) of $66.8 million, up 18% on pcp.
o Industrial Division EBIT of $39.1 million, up 20% on pcp.
o Agri Division EBIT of $33.6 million, up 10% on pcp.
• Net profit after tax (NPAT) of $47.8 million, up 19% on pcp.
• Operating cash flow of $43.3 million, down 26% on pcp.
• Net debt of $25.2 million, an increase of $16.5 million on pcp.
• Final dividend of 13.0 cps (50% imputed) bringing the total

FY22 dividend to 20.5 cps (50% imputed) for the full year, up 21% on pcp.

[winner (n)]

Yep a tremendous result and a continuation of what's happened the last couple of years

For years the Skellerup share price languished in the 100-150 range - should always be worth more was the cry. In 2017 it became more popular and the share price managed to get to 200 odd in 2020.

All those years Skellerup wasn't really a dog (financially) - it was just they disappointed punters with lack of growth and things like that.

Skellerup has always had a pretty good ROE (like 14% to 16% through 2016 to 2020. More importantly they have for a long period of time covered their cost of capital - ie they have created economic value.

Since they really got things sorted big time over the last few years their ROE has improved to 23.5% this year and their ROIC (Return on Invested Capital) has improved nearly 20% (was 10%/11% 5 years ago)

Investors love a high ROIC company - like professional investment managers (not guru broker analyst types) often value a company on this basis - using a thing called Market Value Added (Difference between Market Cap and Equity) which essentially is the NPV of future excessive returns (where excessive returns are those in excess of its cost of capital)

I love chart below - it highlights how much Skellerup has been rewarded because of its growing ROIC.

Pretty incredible eh - like $1.08 of shareholder equity is now valued by the market at $5.82 - Market Value added of $4.74 (probably even more tomorrow)

You cannot view this attachment.

[Left Field]

Great post Winner.  Your chart say's it all.

SKL has realised that there are limited profits to be made by selling retail gumboots (and competing with mass production out of Asia,) but when they can create unique quality solutions for key industries ( eg Mining, dairy, hospitals etc etc) then SKL can make real progress and healthy margins.....

In their words;

"Skellerup's unwavering focus on working closely with key customers to provide engineered products used in a range of critic al applications people interface with every day. "Our products are critical to the supply of safe potable (drinkable) water; the production of milk and milk products; the performance of appliances in homes and workplaces; health and hygiene in hospitals, shops and homes; the safety and comfort of sporting and leisure equipment; and the integrity of roofing systems on homes and workplaces."

I also like that 85% of their Industrial Division's revenue comes from International markets....

"Our Industrial Division generates 85 per cent of its revenue from international markets. We work closely with customers to design and manufacture products that often combine multiple materials such as rubber, plastic and metals to perform in a wide range of critical and high-performance applications. In FY22 we increased sales of gaskets, seals and vacuum systems into potable water and wastewater applications (most notably in the USA) and increased sales of high-performance marine foam products (USA, NZ, Australia and Europe). We also had a ten-month contribution from Talbot Advanced Technologies (acquired on 31 August 2021)."

Onwards and upwards....

[Fiordland Moose]

Yep a tremendous result and a continuation of what's happened the last couple of years

For years the Skellerup share price languished in the 100-150 range - should always be worth more was the cry. In 2017 it became more popular and the share price managed to get to 200 odd in 2020.

All those years Skellerup wasn't really a dog (financially) - it was just they disappointed punters with lack of growth and things like that.

Skellerup has always had a pretty good ROE (like 14% to 16% through 2016 to 2020. More importantly they have for a long period of time covered their cost of capital - ie they have created economic value.

Since they really got things sorted big time over the last few years their ROE has improved to 23.5% this year and their ROIC (Return on Invested Capital) has improved nearly 20% (was 10%/11% 5 years ago)

Investors love a high ROIC company - like professional investment managers (not guru broker analyst types) often value a company on this basis - using a thing called Market Value Added (Difference between Market Cap and Equity) which essentially is the NPV of future excessive returns (where excessive returns are those in excess of its cost of capital)

I love chart below - it highlights how much Skellerup has been rewarded because of its growing ROIC.

Pretty incredible eh - like $1.08 of shareholder equity is now valued by the market at $5.82 - Market Value added of $4.74 (probably even more tomorrow)

You cannot view this attachment.

Nice post winner.

And in less tangible rerating theory they've also managed to shrink their beta. Better ROIC together w lower beta = Borat style "very nice"

[winner (n)]

SKL share price $5.90 puts it on a PE of 24 F22 earnings ..... or say 21 F23 eps ..... not really that high.

I reckon current price assumes about 5% pa growth forever ... not that demanding

[Left Field]

Nice update.....

https://www.nzx.com/announcements/401169

"we expect FY23 NPAT to be in the range of $48 to $52 million, ahead of the record FY22 result of $47.8 million. Our strategy of working closely with customers to provide engineered products that assure performance and often meet demanding food or water regulations continues to generate sustainable earnings growth."

[winner (n)]

Yes leftie - pretty good

Even if its $48.0m its more than last years $47.8m so is going to be a RECORD profit

After 38% profit growth in F21 and 19% in F22 0% to 8% is a bit anemic though .... but better than going backwards
We probably need to take this as a sign that the outlook for many companies in F23 is really that brilliant ....and doing about the same as F22 is going to be a good result

[Left Field]

Undersell expectations then over deliver.........always a good strategy IMO.

[blackie]

my buy order was part filled
picked a few up at todays low of $5.20 .
closed today at$5.59
muted celebrations tho' as when i say a "few" I mean just 7 

[Left Field]

1H FY23 Encouraging results for SKL holders.....even a hint of a divvy increase......previously announced full year 'record' NPAT expectations confirmed.

https://www.nzx.com/announcements/406764

Key points for the six months ending 31 December 2022
• Revenue of $165.5 million, up 10% on prior comparative period (pcp)
• Earnings before interest and tax (EBIT) of $33.5 million, up 3% on pcp
• Industrial Division EBIT of $21.4 million, up 14% on pcp
• Agri Division EBIT of $14.6 million, down 12% on pcp
• Corporate costs of $2.5 million, down 15% on pcp
• Net profit after tax (NPAT) of $23.0 million, down 1% on pcp
• Operating cash flow of $20.2 million, up 3% on pcp
• Net debt of $39.0 million, up $13.8 million on FY22 year-end
• Interim dividend of 8.0 cents per share (an increase of 0.5 cps), up 7% on pcp
• FY23 NPAT forecast unchanged in the range of $48 to $52 million.

Skellerup reaffirmed expectations for another record year with FY23 NPAT forecast to be in the range of $48 to $52 million. Mair said "Markets will remain challenging; however we expect earnings to be stronger in the second half of the year due to seasonal impacts and contribution from new products used in hygiene, potable water and flow control applications. These new products add to our strong foundation to deliver growth in the years ahead."

[Waltzing]

can we take from that at a glance although winnre() will confirm or deny that inflation has hit this NPAT?

havnt had time to investigate.

Percy sold this baby as have to admit we sold also but it was bought as a defensive shot and it turned out to be a market darling after being a very very boring stock...

it turned out to be anything but...

will it bounce back to over 6? boy what a stunner of a company..

[Left Field]

can we take from that at a glance although winnre() will confirm or deny that inflation has hit this NPAT?
......will it bounce back to over 6? boy what a stunner of a company..

On the other channel Snoopy compared SKL to SCT which is well worth a look.

One of his findings; A 136% growth rate at SKL over a five year period equates to an averaged annual growth rate of: 2.36^0.2 = 1.187 or 18.7% per year. However, Snoopy questioned SKL's ability to continue growth at this rate and favoured SCT for the future.

Market today seems not impressed and SP down around 1-2%.

[Waltzing]

growth may slow for sure...but the chart looks like it could consolidate then rebuild upwards...

[winner (n)]

Any news on the deal with FPH they were talking about last year?

[Ricky Bobby]

They are going to have large demand on their products post north island cyclone clean up. They will need to rebuild fast and sku will be in a good position to reduce their stock holdings.