Stealth Group Holdings Ltd (SGI) Earnings Call Transcript & Summary

Well, welcome, everybody, to the half year results for 2023. Apologies, first of all, for being a little bit lagging our start time. [indiscernible]. So apologies for that. Obviously, there is a few slides to get through here. The release that you're about to see will be put up on the ASX shortly after this broadcast. With me today is John Boland, Chief Financial Officer and also Company Secretary. And John will cover off on the financial aspects of the presentation deck. So there will be a number of slides that we won't go through for obvious reasons, but that will set as informing information at the end of the session once the deck is actually put on the ASX. So we're actually quite happy with the way that we performed this year. And one of the things that we've been really [ solid ] from a community point of view is support around raising breast cancer awareness. So through the course of this slide deck, you'll see the color pink quite a bit. There has been a number of people through our organization that have either had direct issues or being impacted on by breast cancer or their families or their friends. So this presentation, obviously, goes even to the support to those people. So today, we'll go through the group highlights. We'll also take you through the strategy, the financial operations, obviously, and then the go-forward position over the course of the next 6 months to the end of FY '23 and then also to our target of FY '25. I guess, reasons to invest sort of evolved over the course of time. Today, we have a large addressable market, but it's very fragmented. And it's also very resilient, which we're finding. It's $52 billion in total. We previously had that $40 billion. There's some other sectors due to our acquisitions that we've now form part of, which provides opportunity for us. In that, obviously, we have a number of diverse exposures to end markets, which also gives us the ability for ongoing revenue streams and repeat business, as well as tailwinds, we believe, over the course of the coming 12 months to 2 years. We've proven over time that our organic growth, as well as our acquisition growth has been solid. That we've grown much faster than, obviously, the market has and our peers, which is demonstrating through market share and also invitation to contracts that we've been invited to previously. The advantages of our scale, as well as our buying power and our network now that sits with our 68 stores throughout Australia is something that obviously is new, and we're at the very beginning of making the most of that opportunity there. Technology is something that we continue to invest in, and it's very important, obviously, it's evolving every day, so to speak. But the way that visibility of the demand from our customers are real-live or real-time data that is live and available, becomes really important to us as an organization. And it's also equally supported to our suppliers, as well as our customers. So that's an area that we will continue to invest in to ensure that we keep ahead of the pack, but also making sure that we bring efficiency in our operations. And I'll talk about where I think margin can come from later on in the presentation. One of the solid aspects of our business is the long-term relationships that we have with, not only blue-chip companies, but a whole raft of customers across all sectors, as well as DIY owned. In doing that, obviously, we have a sales model that is aligned to customer types, and that is large, medium and also small. So the team that actually works online and the team that actually looks up to the major accounts, obviously, have 2 different groups, and we align our operations accordingly and make sure that those demands are met. Over the course of the last 6 months, John and his team has done an excellent job in ensuring that we've maintained really strong disciplines around our capital management. We do operate in a low CapEx model. And obviously, as we will talk about, we had a quite strong cash flow, operating cash flow, as well as free cash flow. Importantly, one of the things that we continue to do with our acquisitions and emergence of that, but also in the markets that we operate, there are numerous opportunities, and we spoke about this in the previous time. We'll take you through a brief that really sort of recaps what happened in 2022, but also the opportunities that are sitting here today and we've recently won 3 new contracts in addition to $1 million in value on an annual basis, and we continue to be at the forefront of that. And that's not because of price. It's also because of our new buying power and our ability to add network to be able to serve the customer on an absolute scale. We have an excellent team, not only the senior leadership team throughout the organization of Stealth, but also in our subsidiaries to lead those businesses day by day and also through our sales teams, our operation teams and our finance teams, they all work in sync with each other, of which leads from culture point of view is something that we really apply ourselves on. So from an investment point of view, we believe from a financial aspect, we're undervalued. We have been very deliberate in our strategy. We make no apologies whatsoever and what's occurred over the last 4 years. We've built a business that has come from $20 million in revenue on one store and about 40-odd people to today, 230 people. We've got 300,000 products in our warehouses. We have 68 different store locations. We have 8,000 customers. That's quite a significant growth process. And obviously, how we execute takes time. We're also happy to pause and then reflect and make sure that during that process, we're getting most out of our execution and our synergies. And again, we won't be forced by sort of anybody to continue down a path just because we've made a statement or a commitment around that. We will always put our hand up and make an apology and give reasons why we've made new decisions the way that we have. So all those factors are obviously driving growth, and that leads us into the '23 year. We're now on Australia's largest industrial distributors across the range of industrial, safety, workplace supplies, as well as truck and automotive. As was said, the 300,000-odd products within our warehouses, as well as our stores. 95% of what we sell is non-discretionary item. So from an economic point of view, as there is, obviously, some challenges that we're facing ahead, being in a business that has non-discretionary items is a benefit. And when we talk about tailwinds, efficiency, opportunity, price and reset and pass on inflationary costs within the products and the services that we sell. We're also obviously expanding our services and solutions, and that continues to evolve [Technical difficulty] upstream and downstream in the supply chain to maximize every revenue opportunity that we can. So to allow us to continue to [indiscernible] given revenue task is much better than obviously to sell a new product. So we've evolved that significantly, and we'll continue to evolve that over the course of the coming years. Okay. So we're talking about the performance. In this slide [Technical difficulty] first of all, what we achieved in FY '22. And the importance of this is to really demonstrate the magnitude of those events. And those -- a number of those events obviously occurred in the lack of period of FY '22. So we continue to merge and implement and consolidate and rationalize our operations from the acquisitions that were undertaken in the second half of FY '22. But obviously, the Skipper Transport Parts business, which we acquired in the first half of '22. As all of that is still an evolving base that provide significant upside, both from maximizing margin opportunities and merger opportunities, as well as consolidation. So we have consolidated the back end, and we'll continue to rationalize that business as it continues to evolve. So covering that, we completed 3 acquisitions. We added 41 new trade stores to our network across Australia. So the one more of those is significant in this own right. The staffing that we onboarded as well was 70-odd people, which is a significant amount of people to onboard and culturally to ensure that they feel a part of our organization. And equally, we understand what they [ faces and ] to help and improve and grow the business that we've acquired, but obviously maximize that as well. The inventory that we acquired that goes with Skipper some 70,000-odd lines, as well as $3.4 million worth of product was consolidated into the Heatleys Safety and Industrial distribution center. So we're obviously getting leveraged by putting that in one location, but that required quite a bit of reset and adjustment to accommodate that on both sides of those businesses. So the room wasn't available. We made it available when we changed our stocking profile to accommodate that. And one of the big things, obviously, which people sometimes underestimate when we migrated the Skipper business onto the same ERP platform as what Heatleys operates under. So there are some nuances and some modifications in regards to the types of parts and products and accessories that are sold through Skipper and not sold through the Heatleys business. So it's a quite significant amount of work that was involved to bring the 5 trade stores onboard, as well as all the metropolitan sites. So the purpose of that asset, so just to reiterate, it's really just to allow everybody to understand the quantum of work and effort that was involved getting into that point. And I guess, we started again on the 1st of July. And that work continued, and there's still work to do with those acquisitions and onboarding. And as we talk about the financials, clearly, our investment around PPE, as well as e-commerce was significantly less than our CapEx requirement from what it was last year. So in doing that, clearly, we're focused on reducing and consolidating as much as we can. So just key highlights in terms of the last 6 months. Good performance in challenging conditions. Obviously, cost inflation hit everybody and that was freight and fuel and the cost of shipping was significant, the supply chain challenges meant that we needed to act quickly and our sales have improved, getting into the process, which we did, and we ensured that we have enough stock in place to meet the demand of our customers. Clearly, our costs went up across most of our suppliers. It dig on the freight distribution. And I think fuel surcharges were moved from something like 5% to 41% in one particular case. So whilst we can pass on a reasonable amount of that to non-contracted customers, our contracted customers, we decided strategically to ensure that we keep our head down and maintain that business. And we work with our customers from a contract point of view to ensure that their impact was minimized as well as ours. Positively, we were able to sustain our gross margin percentage, with obviously, our gross profit dollars increased by around about 15% or $2 million. So the upside of that is, we are establishing the pricing reset, which those prices will go through in the coming 3- or 4-month period, and that will bring benefit to the future period come forth. The supply and demand for our products is really robust. As I said, 95% of what we sell is non-discretionary items. The encouraging part about that is, we're getting more invitations to tenders from larger customers. As I said, we've won recently some large tenders. But importantly, we're finding mid-tier customers have a high demand as well. Now that sits today, where I'm sure like everybody else about what the coming period interest rates increase and other economic issues come into play, but we still feel really, really confident. And why we feel confident is the fact that we're at the beginning of our journey, we're taking market share. So anything that we take is an uplift for us as a business. It won't stop us with our strategy of growth. Our mandate to get $200 million and 8% EBITDA. There's obviously a number of factors that need to roll out to achieve that. We still remain really confident. We've also ensured that from a transformational point of view, one of the key projects or initiatives that are underway is, we're consolidating or we've established new operating division that's focused on procurement and also leveraging Tier 1 suppliers into one consolidated group. So we've moved large Tier 1 suppliers out of the way of subsidiary brands, and we brought them into this new operating division. The purpose of the new operating division is to lead the buying groups be independent of United Tools and also Industrial Supply Group of channels to market and then dedicated professional team that is focused on leveraging our buying power, making sure that we're getting the best price, best product, and supply chain to give us more competitive advantage but obviously improve our margin. In doing that, there is $260 million of spend combined with the company in the independents. There's only $10 million of that, that goes through the Stealth business. So clearly, there is an opportunity for the Stealth organization through a revised business model to leverage revenue but also provide benefit back to the independent members, which are looking for us to help, not only strengthen their own little business, but to be better and stronger and happier probably in some way against the larger profile companies that have really rolling significantly in the last couple of years. So it might be less of a struggle as there's a downturn in the market when they have fixed costs associated with their business. Second half trading is -- or has been for the last 4 years, stronger than the first half trading. So there's 123 workdays in the first 6 months of '23. There's another 5 working days on top of that, that sits through in the period of the second half, but also traditionally, we find that there are a number of months or key months that progresses also. The first 2 months of trading being January and February, we're on target for about $19 million in revenue. So if you annualize that up, we're probably sitting around about $110 million to $112 million. But there are a number of initiatives underway, and we still feel really confident that those initiatives will progress into revenue this period. From a performance point of view, all operating divisions performed strongly. The merger and the synergy benefits from the acquisitions are starting to deliver. So we have consolidated the back office of United Tools, as well as ISG into 1. We've also consolidated the back office, procurement, finance, sales, customer service of Skipper Transport Parts with Heatleys Industrial. That's allowed us to reduce headcount by 7%, and that's why natural attrition not by any other means. And in doing that, we are now set for the next phase of our merger, and that will be around facilities and consolidation of programs, as well as the warehouse operations. With Skipper, we closed 6 unprofitable operating stores that were at customer premises. And that will -- that has reduced annual revenue by about $2.4 million, and there will be another store that we will close shortly. So our revenue would have been obviously $1.2 million higher that would have expected in the first 6 months. But we are very strong on, not having unprofitable operations. And if we can't do that, then we're prepared to walk away. So in doing that, we're clearly working through rationalization and looking at every element now of every cost line to improve our profitability. There are some comments around inflation cost pressures, which I've already mentioned there. We're undertaking a pricing reset for those who don't understand exactly what that is, since we're working through every contracted customer, every line item and all those charges or fee structures will be adjusted. And there will be new pricing passed on to the customers. We're still in an environment where that's acceptable. Clearly, we work closely with customers. We've held our prices as long as we can, but we feel that now is the time to continue to push that through. I think our supply chain have increased by $1 million in our stock in the period, but as a percentage of sales, that's actually, well, it's 29% inventory value versus our sales versus the 2% previously. So clearly, that in of itself is part of the reason why we've improved our cash position, operating, as well as free cash, and it's also allowed us to improve our supply chain, number of days that we deliver or receive goods. Another comment to make is, 16% of our workforce in November are COVID. So I think it was about 37-odd people at some point went down during that period. So whilst everybody sort of put in, did an excellent job, this was in multiple sites. Clearly, it does have some sort of disruptive impact whilst our service levels that are probably maintained, there is no doubt that we lost a little bit of momentum through that period, but everybody returned to work and seeing pretty good at the end of the process. So, what I'll do now is, I'll pass the financial aspect on to John Boland, our CFO. So it's good for John to be a part of, obviously, the presentations now rather than just hearing from me. But obviously, you'll see more of John, and he just continue to be in front of a number of key stakeholders and kind of potential investors, et cetera, and John is obviously part of the process. Here you go.

Thank you, Mike, and good morning to everybody [ present here ]. In terms of the half year financial performance for the period of 31 December, the group achieved revenue $52.4 million. This was up 18% or $8 million compared to the prior comparative period. And this was a combination with organic growth and indirect growth made full year contributions from the acquisitions we did in FY '22. As Mike alluded to, we've reduced some of the Skipper's revenue and non-profit stores over the period. And so, the organic growth would have been the bigger contributor of the 2. And come up with the group EBITDA gross profit of USD 15 million and USD 2 million on the previous financial year or previous half year. And as Mike said, 29% again was a solid margin. And Mike alluded to inflationary and cost pressures have been there and with some challenges on the margins, but also from our cost structure base, we managed to decrease our expenses as a percentage of sales by about 1.5%. So again, when we drop down to the underlying EBITDA, we saw $2.4 million was achieved for the current half year period, and this is up 41% to $1.7 million in FY '22. And this translated into an EBITDA margin of 4.6%, again, that was up on the 3.9% in the last year. So, again, in-line with our 2025 target towards an 8% EBITDA. Again, we've showing that growth sort of period-on-period. Again, as Mike said, in the second half of the year is typically stronger than the first half of the year. And between EBITDA and net profit of our depreciation on translation did rise in the period. And again, that was of the investments in technology and in the acquisitions in FY '22. And also our finance costs from $0.3 million to $0.5 million, again, half year on half year. But for the prior year, we [ look ] only to important cost for the acquisitions. And yes, interest rate sort environment, again, early focus on the debt and how we're managing that. We still continue to pay down our acquisition debt and probably 20% of the interest-related costs are actually to AASB 16 leasing standards. So again, are not subject to the interest rate increase by the RBA. In terms of NPAT, well, that group achieved a $0.3 million net profits for the half year, which compared to $0.4 million loss in the previous financial year. So that's middle scale and activities and increasing and we're holding our margins and keeping our cost disciplines there. We're seeing those benefits drop to the bottom line. And for shareholders, this translated into finance share of $0.31 for the half, 6 months. So now simple annualized basis, that's a 60% for the full financial year, obviously, hoping a meaningful stronger sort of second half. And total [indiscernible] share price is at 20x the ratio of bandwidth [indiscernible] of future growth. And our enterprise value/EBITDA ratio sits at a very modest [ 8.06 ] at the moment. And focusing on the cash flows and on to the balance sheet sort of aspects. The 2 key focuses for us are working capital management and net debt. Total working capital management, that's the inventories reduces the percentage of sales. Our working capital was lower as a percentage of sales as well in the period, and this has contributed to the operating cash flows strong for the period. December was a short working day month at 16. So in general, our receivables and payables are lower in December than they will be at sort of June. That's a natural sort of timing sort of issue. And again, as we said, the inventory $1 million. I guess, we got the cost savings in terms of the underlying cost of inventory revising. But ultimately, it's reducing as potential [ sales and ] managing it well and we are using it to support the growth of the business. From a net debt perspective, again, [indiscernible] timing of our arrangement with CBA. Our [ gross debt ] was $0.2 million higher but the cash was $0.5 million. So -- or $0.4 million. Okay. And a net reduction on the net debt, and that's what we sort of focus on from the business perspective. And within that, we did repay $0.8 million on our acquisitions in the 6 months. We'll continue to do so in the next period to do that by the end of this year 2023. The C&L acquisition should be and probably settled and paid off. And this is our debt to EBITDA ratio were at 2.1x, same as sort of June, and that's the internal metric that we sort of we're working to and obviously continuing to -- continue to lower that. And finally, from a balance sheet [ perspective ] $15.4 million net assets and the profitability, the group continues to increase given the strength of our balance sheet. Turning into the divisional performance in the P&L. Again, we go to the [ 3 years ] the distribution sort of solutions, so very much on the B2B. And we've got the retail store component and preferential sort of C&L Tool sort of businesses. And now you've got the specialized wholesale linked into it. And procurement initiatives and restructures that Mike sort of talked about. The distribution B2B is the heart to our business and through the tendering where we're seeing some of the operations, seeing more opportunities there in a growing portfolio and quality of [indiscernible] WA within the WA-type of index and sort of mining and the strength of the opportunities that we're sitting in. So year-on-year goal is a 10% within the B2B, and within 6% on retail. And again, that's a type of environment sort of out there on demand [indiscernible] pricing. And so, again, working hard with the products that we have, with sort of teams we have [indiscernible] solutions and [indiscernible] customers. And then specialized wholesale, the United Tools acquisition last year was just sort of growth. And [indiscernible] procurement strategies that's really in a way we see a lot of the opportunity and a lot of upside [indiscernible] going forward. And final one around the financials I'll sort of cover as well as [indiscernible] P&L and sort of get into the operational metrics that sits underneath that and drive the business on a daily, weekly, monthly basis. After the technology investments and the [indiscernible] restructuring our level of insights and understanding and able to make fast decisions, and it's a lot stronger and [indiscernible] 24 months ago. And so, for us, the Board, we have seen a daily transaction volume increased 21%. At the same time last year, change is predominantly converts into GP with an 80% sort of growth. But partly, we're increasing the average sales and [indiscernible] sort of in there. But again, it's stunning additional products to them and [indiscernible] selling to customers [indiscernible] customers. Productivity measures, important as well. And again, looking [indiscernible] for our full-time employee. And again, seen double-digit growth in there and continue to [indiscernible] technology initiatives, [indiscernible]. I'll pass it back to you, Mike.

Thanks, John. Good job. So before we go into this slide, clearly, profitability at $0.3 million is not a level that we're satisfied with at any stretch. Our focus has always been to get revenue and scale and give us that ability to become relevant, and we obviously achieved at the end of FY '22, we really had head down in the last months or 8 months now of onboarding some of those acquisitions and really making sure that the inflationary pressures through the organization were well captured and we didn't have any leakage. So to an impact on -- there was some impact, but we did that strategically for the customers, as I said. The other thing that occurred during that time is, obviously, wage has increased quite considerably in a tight labor market. So the base wage increased by 4.6% on the 1st of July for [indiscernible] amount of our staff. But obviously, to keep good employees, we need to make sure that they'll lock away as well from market. So we managed to do that. And we've been really strong in the last 4 or 5 months of [ our stability ] and prior to that, it's probably a 30-day period like everybody that things were a bit chaotic. So what you'll see is an absolute drive for profit improvement, and we still feel very confident about our ability be able to deliver 2025 strategy. So in support of that, clearly, the resources and infrastructure, manufacturing engineering, which is clearly a robust sector for us in Western Australia and Queensland, particularly is very strong and obviously our biggest end market that we cater for. And then obviously it falls off into a bit of a type of -- this is still a period of the first half of 2023. But obviously, this does go through different cycles at a point in time. But we have, for a long, long time, been very strong in that resource and infrastructure sector, as well as the construction element. So we ensure our [ data port ] from a construction point of view, and we had one potential issue, which was we [indiscernible] but that was settled. That was about $160,000, and we are really, really for making sure that there is no bad debt risk for our organization. So clearly, underneath that, this opportunity to grow in the retail and trade, construction is now on, what we believe is, an element of growth for us, particularly in, I guess, the international space. And one of the other areas is the government services that we have new opportunities to provide getting into government business and some certainty as well and just extensive portfolio. So if I can just cover the objectives now for short term, medium term and long term. So clearly, optimizing pricing is all about profitability improvement as is gained market share, as is leveraging technology to deliver operational efficiencies or excellence. One of the terms that we are starting to use in our organization is the word excellence and that is not perfection. That is absolutely everything that we do. We want to be excellent at. So standards across the organization in terms of raising the bar on how we service our customers, how we engage with our suppliers, how we go to market, how we present our buildings, how we present ourselves, is all coming up for a bit of a [ replacement ]. Now, in doing that, there is not a significant capital cost for that. It's more about making sure that we spend the time and the effect in the areas that we need to. We have a Group Resources Manager now that joined us 6 months ago who is an exceptional individual, who has brought a number of key new initiatives into our business. We have 29 people today, that is involved in formal planning with [indiscernible] at the end of that, and that will be expanded over the course of the new period. So spending time with our people, investing in our people, giving them opportunity to [ excel ] themselves but also become more skilled in their role, but also 360-degree feedback by being ensuring that we're listening to them and getting the right work environment and everything they need in terms of the tools to do the job. Supply chain efficiency is always one that requires a lot of work and because it's an end-to-end with multiple touch points. It's an area that we're very comfortable with, but it's also an area that we believe that we can pull cost out of. And we've already spoken about procurement model and customer value. So, I guess, from a short-term perspective, really is the first [ report on ] optimizing our pricing, gaining market share and the delivery of operational excellence. Moving into medium-term. Clearly, it's got the same principles to sit behind that. But the drivers to our profit are a whole host of things in the next page. We'll continue to expand our capability. We will bring in our own production product. We do have a small range of line product where there is slight margin in that and alternatives and we see a great uptick in that area as well. So at the moment, if we are looking at 29-odd percent, we would be expecting north-40s with our line of product range. So that is something that we will advance over the course of the next 12 months. I'll restate about the branding exercising, I think consolidation of brands will be something that we will do in the very near future. The investment in multiple brands, multiple websites and everything else, obviously, at a point in time becomes expensive, and that is absolutely being considered right now. As is our ability in our distribution, our main distribution center anyway to have state-of-the-art just in time facilities and the Heatleys facility and Skippers, they've been for something like 20 years. And whilst it performed and functioned very, very well, it's something that we need to consider if we want to be the market leader about how we're presenting ourselves and keep showcase those types of facilities. And whilst the size would be bigger, the actual cost to ramp, as well as the on-cost of that, not much different. The other thing that we're really looking for in the medium term is new business model from a procurement point of view, linked with the independent, linked with our Tier 1 suppliers. We see significant uplift, particularly if there is $250-odd million of buying spend that goes through there, then there should be no reason why we [ use business ] couldn't pick up at least sort of $50 million of that. And that would then give us the ability to, not only improve our margins, but the independents [indiscernible] they will be able to improve their margins as well because it's negotiating, not only about commercial arrangement, but also volume-based discounts obviously drive better margins for us. And longer term, we want to be the market leader, but we want 150 stores in [ Stealth Global ] with an 8% EBITDA. We are looking for our product range to be at least 15% of our revenue at the 3- to 4-year mark. And that's part of the contributing factor to how we will improve our margins. So the growth plan really forms, I guess, in more detail on what we go through this in more detail but just sort of forms part of what I've just explained to you. So operational excellence, gaining market share, optimize pricing, you can see within each box there, obviously, when it comes up and made available to you, you'll able to look at it in more detail. But clearly, there's elements that the business works on every single day. These are not new, but we're ramping up with a particular focus in those areas. So pricing reset is clearly one. Capitalizing on our merger and our synergies is 2, and driving efficiencies through technology and transformational change is really the third element of where we sort of focused our efforts. So from an outlook point of view, whilst from a macro point of view is softening, we are not saying that. So the demand for our products is continuing to be strong and robust. And, I guess, from our side, we're really encouraged by the fact that there is resilience in the markets that we're playing with. We expect the second half to be stronger than the first half of revenue and profitability, et cetera, and that's unpinned by the resources sector in Western Australia and in Queensland. The cost inflation, we've recovered that in terms of pricing resets, and we'll be passing those on to customers. And there are significant revenue and cost synergies still available through Skippers, United Tools, which we've already sort of mentioned. And in doing that, we're ready to sort of kick the next phase of that program off. We also have, for the first time, flagged an inaugural dividend. And there has been some interesting comments that I've seen and read about this. Simply, we are paying $410,000 a quarter of a fixed debt facility with the Commonwealth Bank for acquisition, that's one part. The finalization, that is 30th of June 2024. So not only is the $410,000 per quarter obviously going out, but we are cash flow positive and we intend on working our inventory harder. So it is time for us to consider to put a dividend for between 30% to 40% of free cash flow. So that free cash flow will be determined on a year-on-year basis based on the demand of the company. And at this point in time, obviously, we're not preparing to give any guidance, but you can see that we're starting to transition ourselves into a cash-generating organization, which was always going to be a point in time when that comes. Will that fund future activities? Well, there are numerous examples of companies that blend both. So if they have debt, they manage their growth and capital accordingly. They obviously still pay dividends, but [ a little bit ] prudent, and I think we've demonstrated the [ willingness ] and as a leadership group that we manage our working capital, as well as all the other financial instruments around that very strongly. We -- our target is something that we've maintained for a number of years now. And we haven't worked at that and nor have we changed that. So the consistency in our messaging remains strong. The confidence in the way that we operate our business remains strong. The opportunity sort of presents itself if something we're really, really comfortable with. And doing that, we feel that the time is near to attract a number of other investor types as well into a company that does provide dividends. So we constantly come up with the issue of liquidity because the stock itself is pretty tight, I guess. So we're trying to create ways of stimulating more interest in the organization [indiscernible] John, obviously, mentioned earlier. So to do that, we've got to be innovative, but also very comfortable in the way that we go about our capital management. So I sit here today very comfortable after leading the business for -- since the IPO and before, obviously, as the founder that the time is right. And in doing that, we will ensure that we maintain strong disciplines around our capital management and the future is obviously well in our sights. But the time is obviously now to put that forward. So a few takeaways, which I'll leave that for you. So good performance. 95% of our products are non-discretionary, that's going to put us in good stead for the coming economic period. We still operate a conservative balance sheet, I guess, the $16 million worth of inventories. It was $9 million worth of available cash and undrawn bank debt. So that keeps us reasonably elevate, but with the way that our organization evolves, we are a growth company and we remain a growth company. So opportunities to reduce our interest expense, which as John mentioned, it's gone up by a couple of hundred thousand. The way I look at it is that, $200,000 that we can make available back to shareholders and improve our profitability. So we've got to be able to make the most of that when it comes available. The largest customer of the [ operator ] is 4% of total revenue and doing a pretty good [ start ]. So I think that's it, Steve.

All right. Thanks, Mike. We have a few minutes for questions, if anyone would like to lodge any. You can just type them in to the question on your screens. While we're waiting for that, we have received a couple of questions, but I'll start with one that we received via e-mail before. And this one is, Mike, acquisitions have formed part of your growth to that, and you have some growth targets in the medium and long term. Can you please tell us how acquisitions might be part of your future growth plans?

I think we've been consistent or I've been consistent in saying that organic growth and acquisition growth are absolutely go hand in hand with the way that we build our business. The type of acquisition has changed, both what we might have looked at 2 years ago is definitely the characteristics of that acquisition very different to that. And the size and the scale of that would have to make -- or have to ensure that obviously is value accretive. So I believe that we'll go through a period of consolidation. There will be opportunities that will be out there. We have always considered the acquisitions. We walked away from a lot more than we secured. We have secured 7 acquisitions in 4 years, 3 in the last sort of 18-odd months. But probably where I sit today, we still have, at least in the next 6 months of being down and making the most of those acquisitions. So if there was something, it would have to be very meaningful, then valuable for shareholders. So it is important for us to consider that. But at the moment, we have lots of organic opportunities as well as we're progressing.

Great. Thanks, Mike. We've got a question from William. Mike and John, well done on the half and outlook. Is the profitability in January and February running at a higher rate than the first half profit?

I feel that's the leading questions. It's -- we're very comfortable with the way the first 2 months have gone. Yes.

Great. Thanks, Mike. We don't have any more questions in the queue. We might just pause for a minute, we still have a couple of minutes in our time slot. Just to give you time, if you do have any questions just type them through. Okay. It looks like we don't have any further questions. So I'll just hand back to Mike to wrap up. Thank you.

Great. Thanks, Steve. I appreciate the questions have been put forward. If there's any more questions that people think they can put that to us after that to John and myself. Look, we -- probably, from our point of view, there's 3 key areas that we see improvement in our profitability that takes us through to our [ ambition ]. In fact, we've got a range from 8% to 14% that we've identified through, not only the efficiencies that I've mentioned earlier, the mergers that have come through and the better buying power. So there's a number of initiatives that sort of tailing to that at a point in time. So we sit really comfortable. Clearly, we want to earn more profit. That is a key driver. Everybody wants to see us do that. People are asking us how we're going to create more liquidity and the results will do itself. We're obviously in a situation where there's people interested in opportunities and companies like us that are real and a real operation, in real people, real infrastructure seems to be of interest. So that's something that we want to take in mind, as well as obviously generating, stimulating the brand itself and pushing it forward to improvements for shareholder value. So thank you. Anything from you? Nothing else.

Nothing else.

All good? Okay. Well, thank you, everybody. We appreciate your attendance. And if you do have any more questions as [indiscernible] send that through. Thank you.

Thank you.