Basic Analysis: Comvita (CVT.NZX)
Interim Accounts to 31.12.21
Overview
Comvita Limited (CVT) is a bee products company which is listed on the NZX.
Nearly half its revenue is derived from Greater China and North America is its fastest growing market.
Two Year Trading History:
Recast Revenue Statement
Key Points:
EBIT up 29.2% to $7.3 mn from prior period
Gross margin up from 49.0% to 56.6%
Recast Balance Sheet
Key Points:
40.7% increase in interest bearing debt
34.9% increase in creditors
Large increase in current liabilities
Equity ratio down from 76.0% to 69.9%
Horizontal Analysis:
Vertical Analysis:
Recast Movements In Equity
Key Points:
Shareholders' funds are 3.3 % higher than the prior period
Recast Cash Flow Statement
Key Points:
-$7.7 mn in operating cash flow including dividend payments
Large cash flow from borrowings of $21.6 mn
Ratio Analysis
Key Points:
Current ratio declined to 2.15 times
Acceptable funding cost cover of 5.8 times
Segmental Analysis
Key Points:
Greater China is the most important market
The North American market is increasing in importance
Horizontal Analysis:
Vertical Analysis:
Summary
Comvita's most concerning accounting item is the negative operating cash flow of $7.7 mn which includes dividends paid of $2.9 mn.
Negative operating cash flows are often a signal that things are not going well for a company.
The company has taken on significantly more debt which has reduced its equity ratio which is, however, still strong.
The increasing importance of the North American market is spreading risk away from too much reliance on Greater China.
The company uses the metric EBITDA when announcing its profits which can show an overly positive performance.
We use EBIT.
Total earnings for the period were up by an anaemic 1.0% to $3.5 mn for the six month period.
The gross margin improved to 56.6% from 49.0% in the prior period which is very encouraging.
Total assets stood at $317.6 mn at balance date.
Shareholders' funds stood at $222.1 mn at balance date so the return on equity was around 1.57% for the interim period.
This is not much above commercial bank deposit rates for six months.
The annual result for the June 2022 year will be released in a couple of months and we will review it when it is published.