One Hospitality Company With Decent Growth Prospects

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One Hospitality Company With Decent Growth Prospects

 One Hospitality Company With Decent Growth Prospects
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As the market participants are well aware, the COVID-19 pandemic has impacted several economies as well as companies. The lockdowns which were imposed to restrict the spread of COVID-19 has impacted the operations of the companies on the global level. Notably, negative impact was also witnessed on the equity markets. However, now some of the companies could perform well. This company has been carrying out operations in the hospitality space in New Zealand. This company has recently released its financial results for the 6 months ended 30th September 2021 and it has posted significant rise in the revenues. The stock price of this company has encountered an increase of ~16.85% in one month. In the time frame of past 1 week, it has increased by ~26.82%.

Summary

  • The company has reported operating earnings of $2.1 Mn for the six-month period ended 30th September 2021 (with the 6 weeks of COVID affected trading).
  • The company has sustained its organic growth with the set-up of Bar Non Solo in the Seafarers Building.
  • The group continues to have discussions with various parties concerning the inclusion of additional profitable assets.

SVR Details

Savor Limited (NZX: SVR) is one of the largest hospitality businesses in New Zealand. The acquisition of the iconic Auckland venues Amano, Ortolana, and The Store in April 2021 has further aided the group’s strength and depth.

Financial Results (6-Month Period Ended 30th September 2021)

  • The group reported an increase in revenue to $17.2 million from $4.9 million in the prior period, driven by the acquisition of the Amano, Ortolana and The Store venues in April 2021.
  • The group’s operating cash flows stood at $1.1 million during the period, against an outflow of $0.1 million in the prior period.
  • The impact of COVID-19 restrictions in the last six weeks of the six-month period ended 30 September 2021 has resulted in significantly lower cash flows. This has led to a mismatch with payments to suppliers and there were no cash receipts.
  • The group has posted a net loss after tax of $0.8 million after including significant non-cash items like depreciation of $2.0 million as well as interest costs of $0.6 million.

 Total Assets and Total Liabilities

Source: Company Reports, Analysis by Kalkine Group

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Expanding Inorganically

The group started the financial year 2022 with the period of consolidation, following the acquisition of Amano, Ortolana, and The Store from Hipgroup Limited in early April 2021.

Further, the group in June, has acquired a centralized distribution centre. This is resulting in deriving purchasing power synergies and also aided to a streamlined supply chain, by directly working with the suppliers to source the highest quality products. The company has managed to complete the review of the lease portfolio, leading to the exit or sublease of the underutilized spaces in order to offset ~$0.3 Mn of the rental costs on the annual basis.

Additionally, in July 2021, the Group managed to acquire Oji Sushi, which helped the company in adding the affordable premium sushi range to accompany its present Japanese credentials.

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Stock Information

The group’s trading results surpassed initial expectations driven by robust performances across the bulk of the existing Savor Group venues. The group has delivered substantial advancement on its cost-out strategy, removing ~$1.0 Mn of the annualized overhead costs, in addition to the ongoing working capital as well as overhead benefits realized with the divestment from Moa Brewing operations.

Additionally, the Group achieved fruitful settlements for the historical claims against the contract manufacturer (100% in favour) as well as the purchaser (85% in favour).

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The company has redeveloped the eCommerce business to garner sales in excess of $0.13 Mn per week for the online deliveries as well as takeaway offerings. This, combined with the capital as well as cost discipline, capped the weekly cash outflow to ~$88,000. The company is well positioned to maximise the trading opportunities after the restrictions are lifted.

The robust trading results throughout winter reflect the high quality venues the company has as well as the potential that the company is capable of achieving. However, the company  has also mentioned that COVID-19 pandemic has been presenting significant challenges as well as it places significant pressure on the business.

The stock of the company ended the session at NZ$0.520 per share, reflecting a rise of 5.05% on 19th November 2021.

Also Read: 10 best food and beverage stocks of New Zealand

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