The Brambles Limited (ASX: BXB) share price is down more than 9% today after the company released its FY19 results. Is this a buying opportunity?
Brambles is a pooling solutions company specialising in the provision of reusable pallets, crates, containers and associated logistics services through the CHEP and IFCO brands. At the time of writing, Brambles has a market capitalisation of around $19 billion.
Brambles reported sales revenue of US$4,595.3 million, representing growth of 7% in constant currency terms and 3% in actual terms. Underlying profit saw a decrease of 3%, however, in statutory terms, profit after tax increased by 112%. This was mostly due to the recognition of a US$945.7 million post-tax gain on the sale of IFCO.
When this sale is removed from results, statutory profit after tax from continuing operations declined by 13% to US$454.1 million.
Return on invested capital (ROIC) remained high at 19.5% while cash flow from operations fell by US$293 million, reflecting a one-off cash inflow that occurred in FY18.
Brambles declared a final dividend of 14.5 cents per share, which is the same as both the FY19 interim dividend and the FY18 final dividend. The dividend will be 30% franked and the dividend reinvestment plan (DRP) is being suspended while the ongoing on-market buyback takes place.
According to Bloomberg, analysts were expecting a dividend of 17.5 cps, so Brambles fell short on that front. The Bell Potter estimate for NPAT was US$622 million, which compares to the reported profit after tax from continuing operations of US$454.1 million.
While underlying profit was much higher, that figure is pre-tax and finance expenses, so the US$454.1 million figure is a more appropriate comparison.
Brambles CEO Graham Chipchase said that FY19 presented a challenging environment.
“We delivered a solid FY19 result in a challenging economic and operating environment,” he said.
“During the year, our teams balanced price realisation with impressive volume growth notwithstanding strong competition in every market and a moderation in like-for-like volumes in line with the slowdown in most major economies and the global automotive industry.”
Is It Time To Buy Brambles Shares?
While the share price decline produces a more compelling valuation, the stagnant dividend and talk of strong competition do not make me confident about Brambles’ growth prospects over the next few years. It may make a good long-term investment but I think there are better options, like the proven businesses in the free report below.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.