Main Event growing for higher profits

Growth in revenues while not an exact proxy for increased profits is often a very good indicator of greater gains ahead. That may be exactly what is happening at the Junior Market listed Main Event.
That was the opening comments of IC Insider’s reporting on the nine months results for 2018. Nearly one year on, Main Event is quietly forging ahead with strong gains in sales and profit for the quarter ending April this year and slightly less growth for the six months period. The 2019 performance outdistance the modest rise in both revenues and profit for 2018.
Revenues for the July quarter last year, surged nearly 26 percent to $364 million, but profit fell 7 percent to $24.5 million and for the nine months to July, profit was up just 4 percent to $105.5 million flowing from a 13 percent rise in revenues to $1.07 billion.
For the current fiscal year, profit climbed 29 percent for the quarter to $62 million from $48 million in 2018. For the six months to April, profit rose a more moderate 15.4 percent to $92 million from $81 million in 2018.
Sales revenue rose 29 percent for the quarter, to $438 million from $341 million and is up 27.5 percent for the year to date, to $896 million from $702 million in 2018. Management in their report on the results states that, “revenue growth reflects higher volumes in the company’s core business as well as success with our new products while 13 percent of revenues or $118 million is attributed to the M-Style products and our presence in the West”
Gross profit grew much slower than revenues in the April quarter increasing 14.8 percent and 16.7 percent for the half of the year. Gross profit margin is still a healthy 47.5 percent in the latest quarter and 45.3 percent in the 2018, for the year to date period.

Administrative and general expenses rose 14 percent to $116 million in the quarter and increased 23 percent in the six months period to $246 million. Marketing and sales expenses declined by from $7.7 million in the prior year’s quarter to $2.6 million in April 2019 and declined from $15.4 million in the six months period in 2018 to $8.6 million in 2019. Depreciation cost rose from $45 million for the half year to $55 million in 2019. Finance cost rose in the quarter, to $5.6 million from $5 million in 2018 and from $8.5 million to $9.4 million for the six months period.
Earnings per share came out at 20 cents for the quarter and 31 cents for the half year. Last year, figures for the nine months showed signs that profit would end up in the 40 cents region but foreign exchange and increased bad debt provisions resulted in a loss in the final quarter and earnings of just 32 cents per share. IC Insider.com is forecasting earnings around 75 cents the current fiscal year ending October and $1.50 per share for the 2020 fiscal year, giving it a PE of around 7 times 2019 earnings and just 3 times 2020 projected earnings.
Gross cash flow brought in $148 million but growth in receivables, inventories, addition to fixed assets offset by loan inflows and reduced payables pushed net cash intake down and liquid funds of $59 million at the end of April. At the end of April, shareholders’ equity stood at $616 million with borrowings at $295 million. Net current assets ended the period at $260 million inclusive of trade and other receivables of $354 million, cash and bank balances of $98 million. Current liabilities stood at $214 million at the end of April.