Annual Report Analysis - Jubilant FoodWorks :: Edelweiss PDF link

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Jubilant FoodWorks’ (JB) FY14 annual report analysis highlights marginal (7%) decline in PBT, negative free cash flows, lower EBITDA margin and return ratios. Despite higher cash profit, free cash flow turned negative at (-) INR229mn (FY13: INR172mn) owing to higher capex of INR2,479mn (FY13: INR1,914mn). Average capex for new stores increased from ~INR7mn in FY11 to ~INR11mn in FY14 due to increase in manufacturing capacities and bigger size of new stores. In FY15 and FY16, JB plans to incur capex of ~INR1.2-1.3bn towards setting up of 4 commissaries. Working capital was supported by increase in payables (trade payables and capex creditors) and also led cash conversion cycle to decline to negative 83 days (FY13: negative 80 days). JB’s (standalone) effective tax rate (excluding prior period tax) increased from 30.4% in FY13 to 32.8% in FY14. Losses (PAT) reported by Sri Lankan subsidiary increased to INR75mn (FY13: INR40mn).

What’s on Track?

Cash conversion cycle improved from negative 80 days in FY13 to negative 83 days in FY14 due to increase in payable days to 103 (FY13:99).

New store (Dominos) addition increased from 111  in FY13 to 150 in FY14.

What needs Tracking?

Standalone EBITDA margin declined from 17.4% in FY13 to 14.8% in FY14 on account of aggressive addition (FY14:150 stores) of new Dominos restaurants, which are yet to mature, low same-store-sales growth (SSG) of 1.6%, low margins in Dunkin’ Donuts stores and high inflationary environment, leading to rise in operating costs.

Despite the 10% increase in cash profit after tax, free cash flow was negative INR229mn (FY13:INR172mn) due to higher capex of INR2,479mn (FY13: INR1,914mn).

RoCE and RoE declined to 36.8% and 24% (FY13: 53.4%, 36%) respectively, due to aggressive addition of new stores (Dominos & Dunkin) (FY14: 166 stores) which are yet to mature, low same stores sales (SSG) growth of 1.6%, increase in average capex per store and decline in EBITDA margins.

Losses of Sri Lankan subsidiary stood higher at INR75mn in FY14 (FY13: INR40mn) owing to heightened competition. JB infused equity of INR138mn in the subsidiary in FY14.

Purchase from related parties  increased to INR99mn in FY14(FY13: INR24mn). Advance of INR60.5mn (FY13: nil) was also paid to related party towards acquisition of land.

Salary cost capitalised during construction period stood higher at INR58mn in FY14 (FY13: INR10mn) as JB changed its accounting policy for capitalisation of project team salary cost.

LINK
https://www.edelweiss.in/research/Annual-Report-Analysis--Jubilant-FoodWorks/27765.html