I had a look at the prospectus. It looks very risky.
The business is forecast to report a loss for FY2017 and lacks a historical track record of profitability. In FY2015 and FY2016 it was abnormal items that made the company profitable, if you look at operating profit the company was also loss making in both of those years. For a company that is well established and with so many stores this is worrying.
Additionally even if you assume that Red Dragon organics will only break even in FY2018 and contribute nothing to profit then the forecast profit per store (company NPAT divided by total number of stores) will be somewhere around the $100,000 mark. That is less than much, much lower than what a typical fast food store makes. If you assume that Red Dragon organics would be profitable than it will look even worse.
A lack of track record, low projected store profitability as well as they fact they are trying to compete directly with giant corporations like McDonalds, KFC, Dominos, etc are all worrying signs. I think steer clear of this is the best course of action.
Most liked posts in thread: OLI - Oliver's Real Food
OLI has tanked today after revising FY18 sales revenue down to $36-37 million, which means they expect to earn $8 million this quarter, down from $10 million last quarter.
Unsurprisingly, its share price has more than halved today and is currently trading at 11.5c, down 53.06% from its last traded price of 24.5c. Ouch!
Look out below! It's been a terrible 12 months for Oliver's Real Food and things seem to be getting worse.
Yesterday's Trading update and revised FY2019 Earnings Guidance was not encouraging reading. FY2019 sales revenue is now expected to be in the range of $34 million to $38 million, which in turn is expected to generate an FY2019 EBITDA loss of between $1.0 million and $4.0 million.
Store closures and cost reductions are part of the company's a cost rationalisation plan which is expected to deliver approximately $1 million in cost savings progressively in H2 of FY2019.
OLI has dug itself into a big hole and it looks like it's going to be very difficult to dig itself out.
A new addition to the ASX 30Pos portfolio (was 40Pos) is OLI. This was a recent addition to my watch list after the second price spike. These spikes in price coincided with the release of two shareholder letters from the Chairman. These letters are worth reading if you're interested in the company. No doubt OLI has been a dog since listing. New mgt are hoping to turn things around.