Asaleo Care Limited, optimised its portfolio

Team Veye | 27 Feb 2021 ASX - AHY
Asaleo Care Limited, optimised its portfolio

Asaleo Care Limited (ASX: AHY)

Asaleo Care Limited (ASX: AHY) on 17 February 2021, reported its full year results for FY20.

Despite the challenged environment due to COVID-19, the company delivered full year earnings ahead of guidance, revenue growth across both Retail and B2B segments, and delivered market share gains across key retail categories.

(Chart Source: Trading View)

Financial Highlights:

FY20 results demonstrated growth momentum in a challenging market:

  • Revenues was up by 2.3% to $419.2m, after 3.0% growth in FY19.
  • The growth in revenue was mainly attributed to: -
  • Strong performance in all Retail segments and B2B Incontinence Healthcare, collectively up 6.7%. Market share growth in key retail categories
  • B2B Professional Hygiene remained solid, down only 4% despite impact of COVID-19 restrictions on “away from home” activity.
  • Gross margin was up by 1.9%driven mainly by the favourable input costs, mix.
  • Underlying EBITDA was reported at $87.2m, ahead of previous guidance of upper end of $84-87m. - Underlying EBITDA from continuing businesses was up by 6.3% to $89.2m 
  • Statutory NPAT was up by 46.2% to $32.3m
  • Continuing earnings per share was up by 34.6% to 7.0cps
  • No COVID-19 related government assistance
  • Further reduction in net debt to $94.9m from $139.3m in FY19 and $260.1m in FY18, reflecting strong cashflow generation and disciplined capital management.
  • Strategic acquisition of TOM Organic expected to be immediately accretive and aligned with Asaleo Care’s portfolio optimisation strategy for higher growth, higher margin categories
  • Fully franked dividend of 3cps declared with a record date of 16 March 2021 and payment date of 31 March 2021.
  • The TOM Organic acquisition, announced in December 2020, is expected to be immediately accretive with first full year EBIT expected to be $1.7m, increasing to $3.5-$4.0m in the second full year, after realising scale and supply benefits.
  • The leverage ratio was lowered to 1.21x from 1.95x in FY19 and 3.25x in FY18, leaving Asaleo Care with a robust and flexible balance sheet.

FY21 and FY22 Outlook

  • Targeting continued revenue growth from FY21 and margin expansion from FY22. - FY21 targeting 5-7% revenue growth
  • EBITDA of $90m - $93m. - FY22 targeting mid-single digit revenue growth and EBITDA growth above 10%. (Data Source – Company Reports)


Veye’s Take

Asaleo Care after exiting the low margin, capital intensive Australian Consumer Tissue and NZ Baby businesses has fully reset its business. The growth was underpinned by investments in its brand portfolio, a strong and flexible balance sheet with the capacity to invest in growth opportunities. Its focus now is to invest in sustainable and profitable growth initiatives, to continue to build a strong pipeline of product innovation in higher growth, higher margin categories, taking advantage of its scale. The stock has given an upside breakout and is expected to maintain the momentum. It can face some resistance at $1.62 but is comfortably trading above its daily and monthly supports. It can have the potential of growing significantly in the near term. Veye maintains a “Buy" on “Asaleo Care Limited” at the current price of $1.42


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