v2 Report
BLUESKY Blue Sky Meats (NZ) Ltd

Commentary: 

Blue Sky Meats (Bluesky) is a meat processing company with operations in Southland: “The group’s principal activities during the year were: The operation of an Export Food Processing Facility at Morton Mains; The marketing of products produced; The selling of products produced” (Directors report, Annual Report 2007)

In recent times the biggest issue facing Bluesky is the currency. Bluesky is heavily involved in exporting and while commodity prices have been strong over the past two years, the NZD has also had a period of sustained strengthening reaching record levels. Thus if the NZD begins to reverse its trend there should be a noticeable effect on the bottom line.

In terms of financial performance the 07 year profit was much in line with 06, revenues increased by 5% however costs also rose. Profitability figures such as ROE and net profit margin were virtually unchanged. Dividend payout was also on par, resulting in a gross yield of about 4%. In terms of balance sheet strength and liquidity, the company has a strong position and conservative current ratios and interest coverage figures.

Going forward the company has a strong balance sheet, and is fundamentally healthy and profitable; however there is certainly room for improvement. The company has the capacity to increase use of debt –which would lead to improved returns on equity and could be achieved through either increased dividends (which would also assist the share price from the DDM perspective); or do a share buy-back, or increase capex on positive NPV projects. In any case it has the capacity to actively improve shareholder value – but at the same time weather any downturn and thus lower the risk; looking forward the key drivers of value are going to be commodity prices, currency trends, and management capability –with currency trends potentially having the greatest upside potential.

By Callum Thomas
4-September-2007

Website:  http://www.bluesky.co.nz

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Financials 
 

Statement of Financial Performance
	2007	2006	2005	2004
Revenue
Sales	88,653,034	84,047,021	83,076,521	96,373,886
Interest received	-	-	-	-
Other	-	-	-	-
Total Revenue	88,653,034	84,047,021	83,076,521	96,373,886
Expenses
Cost of sales	85,242,218	80,881,872	76,379,358	89,905,652
Other expenses	214,334	214,398	213,508	178,358
EBITDA	3,196,482	2,950,751	6,483,655	6,289,876
Depreciation	588,125	534,393	507,202	542,963
Amortisation		-	-	-
EBIT	2,608,357	2,416,358	5,976,453	5,746,913
Interest expense	308,673	228,672	110,761	252,679
Taxation	818,956	720,064	1,940,059	1,820,750
NPAT	1,480,728	1,467,622	3,925,633	3,673,484
Statement of Financial Position
	2007	2006	2005	2004
Assets
Current Assets
Bank and cash	-	141,124	506,649	978,564
Receivables	9,366,925	8,530,001	8,090,609	9,042,376
Inventory	16,599,342	19,887,113	12,717,633	8,425,174
Other	891,332	-	-	-
Total Current Assets	26,857,599	28,558,238	21,314,891	18,446,114
Non Current Assets
Property Plant & Equipment	6,777,547	5,457,004	5,367,827	5,540,770
Investments	-	-	-	-
Goodwill	1,356,890	1,356,890	1,356,890	1,356,890
Other	341,818	288,140	268,787	234,390
Total Non Current Assets	8,476,255	7,102,034	6,993,504	7,132,050
Total Assets	35,333,854	35,660,272	28,308,395	25,578,164
Liabilities
Current Liabilities
Payables	6,702,935	7,179,033	8,437,369	7,962,709
Short term borrowings	873,475		-	-
Other	-	80,943	43,225	99,633
Total Current Liabilities	7,576,410	7,259,976	8,480,594	8,062,342
Non Current Liabilities
Long-term Borrowings	-	-	-	-
Other	7,862,818	8,833,788	-	-
Total Non Current Liabilities	7,862,818	8,833,788	-	-
Total Liabilities	15,439,228	16,093,764	8,480,594	8,062,342
Net Assets	19,894,626	19,566,508	19,827,801	17,515,822
Statement of Cashflows
	2007	2006	2005	2004
Cash flows from operating activities
Operating revenues	87,665,731	83,439,890	85,382,449	99,496,099
Operating expenses	84,648,082	90,286,718	83,906,451	87,797,042
	3,017,649	(6,846,828)	1,475,998	11,699,057
Cash flows from investing activities
Inflows	185,041	27,556	21,000	30,608
Outflows	1,716,297	651,126	355,259	1,807,172
	(1,531,256)	(623,570)	(334,259)	(1,776,564)
Cash flows from financing activities
Inflows	-	8,833,788	-	-
Outflows	2,500,992	1,728,915	1,613,654	8,739,350
	(2,500,992)	7,104,873	(1,613,654)	(8,739,350)
Net Increase (decrease)	(1,014,599)	(365,525)	(471,915)	1,183,143
Opening cash	141,124	506,649	978,564	(204,579)
Closing cash	(873,475)	141,124	506,649	978,564
	Analysis
Per share figures
Dividend/shares	0.10	0.15	0.28	0.38
NPAT/shares (EPS)	0.13	0.13	0.68	0.64
EBITDA/shares	0.28	0.26	1.13	1.09
Net Assets/shares	1.73	1.70	3.44	3.04
Profitability
ROA	4.19%	4.12%	13.87%	14.36%
Equity multiplier	1.8	1.8	1.4	1.5
ROE	7.44%	7.50%	19.80%	20.97%
ROavgE	7.50%	7.45%	21.02%	-
Net profit margin	1.67%	1.75%	4.73%	3.81%
Liquidity
Net working capital	19,281,189	21,298,262	12,834,297	10,383,772
Current ratio	3.54	3.93	2.51	2.29
Quick ratio	1.35	1.19	1.01	1.24
Working capital ratio	0.55	0.60	0.45	0.41
Capital structure
Debt to equity	0.78	0.82	0.43	0.46
Interest coverage	8.45	10.57	53.96	22.74
Shares	11,526,098	11,526,098	5,763,049	5763049
Dividends paid	1,152,610	1,728,915	1,613,654	2,196,277
Dividend payout ratio	78%	118%	41%	60%
Growth rates
Revenue	5.48%	1.17%	-13.80%
EBITDA	8.33%	-54.49%	3.08%
NPAT	0.89%	-62.61%	6.86%
Total assets	-0.92%	25.97%	10.67%
Net assets	1.68%	-1.32%	13.20%
g = (ROE*(1-DPR))	1.65%	-1.34%	11.66%	8.43%
Other
Share price (14-August-07)	$            2.50	Avg 4 yr growth rate (NPAT)		-18.29%
Market cap	$  28,815,245	Cmpdg 4 yr growth rate (NPAT)		-20.32%
Enterprise value (EV)	$  44,254,473	Avg 4 yr growth rate (NA)		4.52%
EV/EBITDA	13.84	Cmpdg 4 yr growth rate (NA)		3.23%
P/E Ratio	19.46
P/NA ratio	1.45
Dividend yield	4.00%
Earnings yield (E/P)	5%

Company balance date: 31 March

Supplementary Information

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