Lynch Group Holdings (ASX: LGL), a wholesaler and grower of flowers and potted plants in Australia and China, reported modest revenue growth for FY24. Despite their strong performance in Australia, the Company faced challenges in China due to weaker consumer demand and price declines.
The Company reported its full-year results for the 12 months ending 30 June 2024, highlighting a year of modest revenue growth attributed to challenging conditions in China. The Group’s revenue increased by 1% to $397.7 million, supported by stable demand in Australia. However, this was tempered by a cautious consumer environment in China.
EBITDA for FY24 was $39.6 million, down 7% from the previous corresponding year. NPATA stood at $9.2 million, a 41% decline year-on-year, attributed to increased depreciation and higher interest expenses.
The final dividend for FY24 was declared at 8.0 cents per share, bringing the full-year dividend to 12.0 cents.
In Australia, Lynch’s revenue grew by 1.8%, with the floral market demonstrating resilience despite broader economic challenges. The Company’s supermarket channel saw increased penetration, contributing to stable demand and improved earnings. EBITDA in Australia rebounded, increasing by 50% on FY23, driven by moderating logistics costs, improved labour availability, and efficiency gains from targeted cost reductions.The Group’s sale or return store network expanded, accounting for 26% of the store network, further bolstering revenue.
Hugh Toll, Chief Executive Officer, commented, “In Australia, despite the challenging economic conditions facing consumers, we continue to see the relevance and durability of the floral segment.
“The growth in revenues, whilst modest, reflects the continuing penetration of our product category in the supermarket channel, with key event windows further adding to the awareness of our in-store offer.
“Earnings have rebounded strongly over the year, in part due to the normalising of logistics costs, but also underpinned by initiatives around procurement and labour management. SOR sales growth continues to outperform core store growth.”
Conversely, revenue in China declined by 12%, impacted by weaker consumer demand and significant price declines, particularly in the rose segment, where prices fell by 18%. Despite these headwinds, the Company managed to maintain strong operational controls, with production costs remaining well-managed. However, the fixed costs structure, combined with weak demand, resulted in a 61% drop in EBITDA in the region.
“While the current market challenges in China have impacted these results, we remain focused on the things we can control, Toll said.
“We see opportunity for growth in our local market and remain confident that the China floral market offers significant opportunities for the Group over time.
“In China we will continue to further develop our downstream sales capabilities, but we feel it is appropriate to pause substantial expansion plans at this time, until we can see a sustained improvement in market conditions. The operating leverage in our business in China is significant, with any improvement in pricing from current levels expected to rapidly translate to improved earnings.”
Lynch Group remains focused on areas it can control and sees long-term opportunities in the region. For FY25, the company expects continued growth in Australia, supported by further category penetration in supermarkets, while in China, expansion plans will be paused until market conditions improve.
Sidra is a Business Writer with The Sentiment
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Shraddha13
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