Longtable Group’s Shares Tumbled On ASX Despite Reporting Improved FY18 Results

On 26 October 2018, Longtable Group Limited (ASX:LON) released its annual report in which the company reported decent results across its premium portfolio of food & drink brands. Following this news, the share price of the company decreased by 5.405 percent as on 26 October 2018.

In FY 2018, the company started its progress on its strategic pathway with the acquisition of two strategic growth opportunities with Paris Creek Farms and St David Dairy. In FY 2018, the company achieved revenue of $8.61 million, reflecting Paris Creek Farm’s net sales achieved since 22 December 2017, which was the date Longtable acquired that business. The Company incurred a loss after tax of $6.67 million mainly due to the transition of Paris Creek Farms to a sophisticated corporate business model, corporate costs associated with acquisitions and building group structure and the restructuring of the Maggie Beer Products investment.Â

Paris Creek Farm’s sales performance for FY18 incorporated a temporary shift towards lower price point customer channels, coupled with the temporary deranging of some SKUs, in readiness for the renewed product launch. Due to the volume and gross margin in FY18 were greatly affected but it does not reflect the business’ potential going forward. Product category mix remained consistent, with milk at 59% of sales, yogurt at 17%, cheese at 9%, with the balance in the other categories. Paris Creek Farms is not expected to take any major capital investment in FY19, except where opportunities are identified for significant new product launches aligned with brand credentials. Paris Creek Farm’s most valuable resource, biodynamic organic milk, has consistently increased over time, increasing by approximately 8% compared to 2H FY17 volume, at 5.1 million liters.

Maggie Beer Products progressed its program of transformational change and incurred a loss after tax of $1.23 million in FY 2018. The Group’s equity accounted for the share of this loss is $0.59 million. After a capital upgrade of equipment, there has been a deep focus on managing costs, which led to a restructuring of the business. These initiatives will have a positive impact in FY19. St David Dairy is involved in the milk business, was acquired by Longtable in August FY 2018 and St David Dairy has demonstrated strong sales performance since the buyout. The company is having a strong balance sheet with net assets of $63.53 million, including a cash balance of $14.78 million. The cash balance in June includes the proceeds of the capital raising associated with the acquisition of St David Dairy.

In the last six months, the share price of the company decreased by 53.16 percent as on 25 October 2018. LON’s shares traded at $0.350 with a market capitalization of circa $45.41 million as on 26 October 2018 (AEST 4:00 PM).

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