DGL.ASX

[winner (n)]

NBR points out that the only female Director has resigned

And reminded us that independent review of DGL's culture last year, sparked following founder and chief executive Simon Henry's inappropriate comments about Nadia Lim in an interview with NBR, recommended "that more gender diversity be introduced into senior management and leadership positions".

[Shareguy]

Not as bad as some were expecting. Costs and interest rates taking its toll. At least Simon has said "no more shares as payment for future acquisitions" Debt creeping up. Revaluations not saving the day this time. 2024 looking ok so far.  Needs to bed in all the newly acquired businesses and raise prices.

Buy back starts on the 30/8. Will be interesting given their debt level and interest rates.

Disc: hold for me and won't be adding

[Ferg]

CEO Simon Henry talked about DGL recently with an analyst.  Interesting questions and answers.

[Shareguy]

Thanks for posting Ferg. Mike at Pie funds says small caps are on sale. This is one of them in my opinion

[Hectorplains]

Thanks for posting Ferg. Mike at Pie funds says small caps are on sale. This is one of them in my opinion

CEO Simon Henry talked about DGL recently with an analyst.  Interesting questions and answers.

AGM is Tues.  He is freshingly unscripted but his positivity papers over some of the cracks.

[Ferg]

He is freshingly unscripted but his positivity papers over some of the cracks.

I agree about the positivity.  I get the sense he has had some sort of media training since the "fluff" affair. In a previous video he came across as very driven and focussed, and whilst that has not disappeared, IMO he now comes across as genuinely likeable.

Which cracks do you refer to?  He talks through the depressed share price and the impact thereof.  IMO it was interesting hear him discussing the M&A techniques and the differing methods for running differing acquisitions.

[Hectorplains]

Which cracks do you refer to?  He talks through the depressed share price and the impact thereof.  IMO it was interesting hear him discussing the M&A techniques and the differing methods for running differing acquisitions.

The interview was a bit of patsy really.  The interviewer clearly holds the stock and was throwing down lobs for Henry to whack. 

Three areas straight off that I think were either not well done or are potentially problematic:

He discusses the buy-back at some length - and especially the impact it may have if the share price moves up.  He neglects to mention that the buy back has been done at prices that are well north of where the share price is today.  That may just be bad luck...or it could be that they went too hard and fast at the start of the process?

No mention of addressing margins which is what lead the June downgraded to EBITDA guidance from $71.5-73.5m to $64-66m. A further 3% retreat in EBITDA to $63.6m is the consensus for the full year.  That's not the numbers of a great growth story.

Impacts of $66m bank debt they're now carrying on their books. 

I have a few but won't be adding any more until it's a clearer picture of margins and growth.

[Ferg]

Thanks for that.

I thought the interviewer let Simon speak and didn't try to talk over him.  Something our media could learn - I want to hear the interviewee, not the interviewer.  Letting him speak without interruption is a good technique; sometimes you can find out more than intended from that method.  But as you say 1 or more topics were glossed over.  Andrew mentioned very early on that he wasn't going to ask questions where the answers were available elsewhere....maybe that had something to do with it?

Fair enough regarding the reduced margins and consequent EBTIDA although as they say "a swallow does not make a summer"...by that I mean even good companies can have a bad year**.  Most companies undergoing excessive growth experience growing pains - whether that be personnel, funding, focus, inventory & debtors etc.  What I have seen in growing businesses is they grow like teenage boys: first out, then up, then out, then up.  Unless it is a unicorn like HLG which has a slowly slowly catch the monkey philosophy of growth via retained earnings, but I digress.

In other words investment in infrastructure and capacity can result in cost bloat which takes time to deliver additional profits.  Plus not all (or many?) financial trends are linear as much as we would like them to be.  Analysts love to connect dots with lines...I admit I am also guilty of this.  At the risk of stating the obvious, it is what happens next that is important.

{**Also notice the number of companies now reporting 5 years financials so we can look through the latest result that is down due to the Covid sugar hit.  That may apply to some DGL subsidiaries, but could be muddied for the Group due to acquisitions....I haven't checked this in detail.  Sometimes we need to look at a wider context than just last year versus the previous year.}

I haven't done a deep dive on DGL margins but that can be impacted by things like mix of product sales which is not necessarily an indicator of falling volumes of prices.  I will look into that more closely.

A buyback under NTA is a good buyback IMO - hindsight being 20/20 they could have bought better.  Hopefully they learn from that.  I also wonder if some buybacks were timed to soak up vendors shares coming out of escrow.

As an aside I found a couple of malapropisms amusing: issuing 'script' instead of 'scrip' and the word 'agglomerate'...unless they were compiling board papers into a rounded mass or into a jumbled heap....but no matter, we could see what Simon meant.

Disclosure: holding and accumulating on price weaknesses, but not a large position.
Outlook: if Simon can do what he says then great...but it might take a few reporting periods to be re-rated by Mr Market.

[Shareguy]

Talk of adblue shortages again maybe the answer to share price increase.

[KW]

Talk of adblue shortages again maybe the answer to share price increase.

really?  that's another side effect of the Marsden Pt closure.  Will bolster Winston's plans to reopen it.  

[Ferg]

Talk of adblue shortages again maybe the answer to share price increase.

Thanks for that.  Where did you see this talk?  I had a quick look online and couldn't see anything.

[Shareguy]

Thanks for that.  Where did you see this talk?  I had a quick look online and couldn't see anything.

There is discussion on this on hot copper. China looking to curb exports.  Not sure if share price growth has anything to do with this or not. My understanding was that Australia were allowing large mining of Urea to give some surety given the importance to farmers and transport industry.


https://www.bloomberg.com/news/articles/2023-09-07/china-asks-fertilizer-makers-to-halt-urea-exports-on-price-surge

[Shareguy]

Share price slowly creeping up. Bell potter latest note $1.20 out perform.

[Shareguy]

$1.00 and climbing.

Disc: Largest position on ASX

[KW]

Share price slowly creeping up. Bell potter latest note $1.20 out perform.

Noticed that.  It will be interesting to see what it does when it runs into resistance/overhead at $1.16.