Broo Ltd. :BEE-AU: Earnings Analysis: For the six months ended June 30, 2017 : October 6, 2017

Broo Ltd. reports financial results for the half-year ended June 30, 2017.

Highlights

  • Summary numbers: Revenues of AUD 0.60 million, Net Earnings of AUD -2.02 million.
  • Gross margins widened from -203.64% to 17.38% compared to the same period last year, operating (EBITDA) margins now -300.84% from -934.89%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-06-30 2016-12-31 2016-06-30 2015-12-31 N/A
Relevant Numbers (Semi-Annual)
Revenues 0.6 0.35 0.17 0.33 N/A
Revenue Growth (YOY) 249.48 4.75 N/A N/A N/A
Earnings -2.02 -1.47 -1.66 -0.99 N/A
Earnings Growth (YOY) -21.67 -48.06 N/A N/A N/A
Net Margin -339.53 -418.32 -975.27 -295.94 N/A
EPS -0 -0 -0 -0.01 N/A
Return on Equity -26.67 -33.09 -233.62 -85.07 N/A
Return on Assets -48.69 -56.31 -179.85 -85.12 N/A

Access our Ratings and Scores for Broo Ltd.

Market Share Versus Profits

Compared to the same period last year, BEE-AU’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if BEE-AU’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 70.06% and earnings by -38.03% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from -203.64% to 17.38%, while operating margins improved from -934.89% to -300.84% over this period. For comparison, gross margins were -7.38% and EBITDA margins -384.75% in the immediate last period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

BEE-AU’s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 2,883.70, compared to last year’s level of 1,092.77 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -949.04% to -300.84% and (2) one-time items. The company’s pretax margins are now -339.53% compared to -975.27% for the same period last year.

Access our Ratings and Scores for Broo Ltd.

Company Profile

Broo Ltd. engages in the manufacture and sale of packaged beer. It offers Broo Premium Lager and Australian Draught. The company was founded by Kent Grogan in 1993 and is headquartered in Sorrento, Australia.

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