re: Ann: Clover 2013FY Results - Investor Pre... I think it was...

re: Ann: Clover 2013FY Results - Investor Pre... I think it was more of a mixed result.

On the plus side:

1)
Increased level of Inventory. The additional stock will be utilized in FY2014. Also an increase in Trade Receivables due to the timing of supply and the trading terms with a number of major customers.

2)
67% increase in Oceania sales of infant formula ingredients products.

3)
In 2014 Clover should also see some contribution from sales of new products.

4)
Revenue up 14.9%

5)
NPAT up 8.7% on 2012 result (after taking into account the $1.22ml impairment on last yrs numbers due to FFI venture).

Not so positive:

A)
4) and 5) tell the story of Gross Profit Margins under pressure. To quote from the report; "There has been competitive pressure on product margins for our established products during the past year and these forces will continue for the foreseeable future".

B)
The recent milk powder contamination incident in New Zealand will have a negative impact for some of our customers, leading to a reduction in infant formula sales.

C)R&D spend for 2013 was $1.8m (FY2012 $1.5m).
As a result of the Preterm product project; "It is expected that there will be additional R&D expenditure in FY2014 of approximately $1.0m". (The graph on pg 15 of the results presentation shows it climbing to $3.0m or a $1.2m increase as an FY14 Budget estimate). An increase of 67% over FY13.

This from a company that essentially made $500,000 more in FY2013 than in FY2012.
Profit after tax FY2013 6,078,000
Profit after tax FY2012 5,591,000 (Underlying - excludes the $1.22m of FFI related costs).

Another figure a few might not be aware of but may find useful.

FY12 EPS = 2.60c Div = 1.75c POR 67%

However when you use the FY12 *Underlying figure excluding FFI $1.22m cost.

*FY12 EPS = 3.35c Div = 1.75c POR 52%

FY13 EPS = 3.77c Div = 2.00c (total) POR 53%

Fairly clear POR guidance.

Having said all of the above; In summary CLV has pressure on margins on existing products and the contamination case impact as well as a fair increase in R&D spend on what they hope will be a "company changer". They are however selling more product and have an inventory overhang. I do wonder what the view on Div's will be in FY14 given the R&D spend.
As a shareholder I keep my CLV shares in the hope that the R&D money is well spent. I rate them a spec buy on that hope.

This is just a collection of observations made whilst going through the numbers. Not meant as a ramp either up or down on the stock. I do hold a small parcel of CLV shares. Hope others will share their views on the observations.
Cheers.