What: Leading global pallet and container logistics firm Brambles Limited (ASX: BXB) has reported single-digit growth in sales revenue and profits for the full year ending June 2014.
On a constant currency basis (which excludes the effects of movements in foreign exchange) the firm grew sales by 7%, underlying net profit by 6% and underlying earnings per share by 5%. Return on capital invested was a very healthy 16.3% and the full year dividend totalled 27 cents per share. Maintaining the dividend was impressive considering its document storage business Recall Holdings Ltd (ASX: REC) was demerged and did not contribute earnings to the group for around seven months in FY 2014.
So what: Given the enormous size of Brambles' operations and the headwinds faced in some of its operating regions (particularly Europe) the slower growth rates are not surprising. Growth rates at these levels do however bring into question the sensibility of paying a multiple of 22.3x for the stock – based on underlying EPS converted to Australian dollars at the current foreign exchange rate of 1.076 cents.
Now what: CEO Mr Tom Gorman stated that "we expect constant-currency percentage sales revenue growth for FY15 to be consistent with our five-year target in the high-single digits." Mr Gorman went on to say "we expect profit growth in FY15 to reflect sales revenue growth as well as efficiency improvements across the Group." All told, management provided guidance for underlying profit growth of between 7% and 10%.
Once again, while these growth rates are certainly respectable, investors should question if the current multiple being applied to the stock is appropriate.
