Lynch Group upgraded guidance for FY23 … you could say it’s blooming

Lynch Group (ASX:LGL) hasn’t been the hottest ASX stock by any means, but it just upgraded guidance for FY23 at a time when so many other companies are downgrading it.

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Meet Lynch Group

Lynch Group is a wholesaler of flowers and potted plants in Australia and China. It was founded in 1915 by Greek immigrant Leo Lynch and after a century in the family, was sold to private equity in 2015 and listed in 2021 (unusually without the private equity owner selling).

The company’s promise was the growth potential in China but even in Australia considering the low proportion of flowers sold in supermarkets and how Lynch had a dominant position in the market. But it has struggled to penetrate the market in China and its shares have more than halved since listing. There has been speculation that it could be bought out by private equity – indeed, the company was made by the ASX to address the speculation.

Upgraded guidance

The company has just been through Mother’s Day, one of the biggest selling periods of the year. And in China, demand was rebounding following the country’s re-opening as well as a reduction in freight costs due to increased aircraft capacity. LGL previously guided to $36-$40m in FY23 EBITDA at a group level, but now expects $42-$43m. Lynch also told shareholders to expect a resumption of dividends at results time.

Nevertheless, this would be a decline from FY22 when it made $48m and this was a downgrade from the $59m the year before. The company had continued growing revenue, but costs had an impact on margins.

In any case, investors like the increased guidance with the stock up more than 13%!

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