(Rs m) | 3QFY04 | 3QFY05 | Change | 9mFY04 | 9mFY05 | Change |
Net Sales | 233 | 239 | 2.5% | 517 | 558 | 8.1% |
Expenditure | 190 | 195 | 2.9% | 428 | 463 | 8.2% |
Operating Profit (EBDITA) | 44 | 44 | 0.8% | 89 | 96 | 7.5% |
EBDITA margin (%) | 18.7% | 18.4% | 17.2% | 17.1% | ||
Other income | 2 | 3 | 41.7% | 7 | 8 | 23.2% |
Interest | 1 | 2 | 16.7% | 4 | 4 | -0.3% |
Depreciation | 4 | 4 | 8.9% | 12 | 12 | 0.2% |
Profit before Tax | 40 | 41 | 1.3% | 80 | 89 | 10.3% |
Tax | 15 | 15 | 1.7% | 29 | 33 | 15.2% |
Profit after Tax | 25 | 26 | 1.0% | 52 | 56 | 7.5% |
Net profit margin (%) | 10.9% | 10.7% | 10.0% | 10.0% | ||
No. of Shares (m) | 6.5 | 6.5 | 6.5 | 6.5 | ||
Diluted Earnings per share (Rs)* | 15.6 | 15.7 | 10.6 | 11.4 | ||
P/E ratio (x) | 6.4 | |||||
(* annualised) |
The company reported a minor 3% revenue growth during the December quarter (2004) and a negligible profit growth. During the nine month period (9mFY05), the company clocked an 8% revenue and a similar profit growth. The company's operating margins were largely steady, both for the quarter and the nine month period.
Gifts - the redeeming factor: The company's business of 'gifts' has meanwhile, clocked an encouraging growth. While revenues from this business were up 25% in the quarter, the nine month period saw 37% growth for this segment. As a result of the strong growth, the business' share in total revenues has gone up from 29% in 9mFY04 to nearly 37% in 9mFY05. This has been the saving grace for Archies' overall performance. The company's stationery business has done nothing much to write home about.
(Rs m) | 3QFY04 | 3QFY05 | Change | 9mFY04 | 9mFY05 | Change | 9mFY05 revenue mix |
9mFY05 PBIT contribution |
Greeting Cards | 138 | 123 | -11.1% | 277 | 263 | -5.3% | 47.0% | 66.4% |
PBIT margin (%) | 29.1% | 27.9% | 31.6% | 31.2% | ||||
Stationery Items | 33 | 34 | 1.0% | 73 | 76 | 3.8% | 13.6% | 13.3% |
PBIT margin (%) | 21.3% | 22.5% | 21.2% | 21.6% | ||||
Gifts | 62 | 77 | 25.1% | 149 | 204 | 36.5% | 36.5% | 19.5% |
PBIT margin (%) | 8.3% | 14.7% | 7.9% | 11.8% | ||||
Others | 7 | 6 | -16.6% | 20 | 16 | -22.2% | 2.9% | 0.8% |
PBIT margin (%) | 18.4% | 8.8% | 15.5% | 6.4% | ||||
Perfume | -6 | 0 | -100.0% | -4 | 0 | -100.0% | 0.0% | 0.0% |
Net Sales/Income from operations |
234 | 240 | 2.5% | 518 | 559 | 8.0% | 100.0% | 100.0% |
Total PBIT margin (%) |
21.5% | 22.4% | 21.6% | 22.0% |
Profitability report: As mentioned earlier, the company has managed to retain its profitability, despite a sluggish showing in its core business of greeting cards. The company's earns the highest margins from the cards business and any sluggishness in this should reflect in the profit growth. This has not happened in 9mFY05, primarily because the company's other key revenue contributor - Gifts, has seen its margins improve signficantly during the period under review, thereby balancing the overall profitability. Consequetly, the company's bottomline growth in 9mFY05 has reflected the topline trend, despite higher effective tax rate at 37%.
as a % of net sales | 3QFY04 | 3QFY05 | 9mFY04 | 9mFY05 |
Total Cost of goods | 38.3% | 38.4% | 36.0% | 36.2% |
Staff Cost | 7.1% | 7.2% | 9.1% | 8.9% |
Other Expenditure | 35.8% | 36.0% | 37.7% | 37.8% |
Total expenditure | 81.3% | 81.6% | 82.8% | 82.9% |
At the current price of Rs 73 the stock trades at a modest 6.4 times its 9mFY05 annualised earnings and market cap. to sales of 0.7x. However, the sluggishness of its business portfolio has led to the waning of investor interest in this category. Should the company sustain its growth in the gifts business, things may look up for this company. At the end of FY04, the company had outlined plans to add 100 retail stores over the next 5 years (till 2009). This reach may help it improve its volumes, but this may also entail cash flow pressure in the medium to long term. At the current juncture, though valuations look attractive, growth is a concern. The strategy should be wait and watch.