Earlier today, honey packer and distributor Capilano Honey Ltd (ASX: CZZ) reported a 70% rise in profits to $7.8 million for the year to June 2015 driven by a 40.5% increase in revenues to $120.9 million. The company increased its final dividend by 87.5% to 37.5 cents equating to a fully franked dividend yield of about 2.4% at current prices.
Despite such an impressive set of numbers, the share price fell 6.6% in trade to $15.80 and in my opinion this is because the market was already expecting such a strong result. Even after the drop, Capilano is trading at a price-to-earnings multiple of over 17x which is high for a company exposed to agriculture risks such as disease and weather fluctuations.
Still, Capilano shareholders have much to be happy about given the stock's 123% capital return over the past year. Here are ten things to note from today's report.
- The profit result is even better than what it first seems. Last year's figures included $1.4 million of net insurance proceeds from the fire at the company's Richlands premises in September 2012. Excluding this, profit after tax rose 144% on last year compared to the statutory figure of 70%.
- Domestic revenues were up $29.3 million on last year, contributing 84% of the total increase in revenue. Capilano is the market leader in Australia and improved its market share over the year.
- Export retail sales increased by 29% with sales into Asia up 29%, North American sales up 36% and Middle Eastern sales up 33%.
- During the year, Capilano acquired Chandlers Honey providing it with greater honey supply. Chandlers cost $1.1 million made up of $0.5 million of newly issued shares and the rest cash.
- Australian honey supply remains weak compared with historical averages although better than last year's lowest ever production. Consequently honey prices are high.
- Sales of higher value Health and Wellness products such as Manuka honey and Beevital were up 46% on last year.
- Capilano continues to focus on maintaining and improving its relationship with beekeepers who it relies upon for supply. Domestic receipts were up 19.6% to 9,265 tonnes.
- The company is well prepared for an increase in supply. Managing director Ben McKee said in his review of operations, "Capilano has the operational capability and business infrastructure to grow production considerably"
- Cash flows from operations were just $7.6 million compared to $11.8 million last year. This is because last year's numbers included insurance reimbursements and also the business now requires higher receivables and inventory levels to support growing revenues.
- Revenues and profits were not only better than last year but also an improvement on the first half of 2015. Revenues were up 9% to $63 million and profits after tax rose 18% to $4.2 million compared to last half.
