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Tassal shares halted as it asks investors for $109 million

This morning Tassal Group Limited (ASX: TGR) released its results for the financial year ending June 30, 2019. Below is a summary of the results with comparisons to the prior year. 

  • Sales of $560.8m, up 15.7%
  • Operating EBITDA $112.3m, up 12.6%
  • Statutory net profit $58.4m, up 2%
  • ‘Operating profit’ $56.6m, up 12.5%
  • Basic earnings per share 33cps
  • Final dividend of 9cps, total dividends 18cps
  • Return on invested capital 10.6%, compared to 11.2%
  • Total salmon sales volume was up 10.3% to 33,856 Hog tonnes
  • Gearing ratio (net debt / equity) 28.2%, up from 18.7%
  • To raise $108m at $4.40 per share

Tassal CEO Mark Ryan said: “Salmon market conditions continued to be favourable with strong growth domestically, while utilising the export market as a strategic lever to optimise sales. Positive pricing outcomes as well as growing volume in both the domestic and export salmon markets offset increased cost of goods sold.”

While the group’s sales andoperating earnings are higher partly thanks to rising demand for salmon reflecting better pricing, it should be noted that ROIC, gearing and and return on operational assets have all gone in the wrong direction.

This is partly due to its acquisition of a prawn farming business in FY 2019 that has yet to flow through to earnings. 

The group is raising $109 million to fund its growing prawn farming ambitions in Queensland, with the $4.40 per share offer price a 6.8% discount to the last closing price. 

Tassal shares are up 18% over the past 5 years before dividends that tends to reflect its strengths and weaknesses as an investment prospect.

Another Tasmania-based rival in Huon Aquaculture Ltd (ASX: HUO) may also interest investors in this space. 

I’m not a buyer of shares myself and would definitely prefer the business below for the long term. In fact it’s one of my larger personal holdings for income and growth….

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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