I have to admit to being lazy balance by just pulling last years annual report off the shelf and pulling out some rough numbers. So I will have another (closer) look at my figures.
Fair call on my bluster Balance!
Not sure what report you mean Balance. The April 8th 2009 stock exchange profit announcement for FY2009 does not contain a balance sheet.Quote:
Balance sheet from latest report show - net debt at $33.6m (not $100m).
However, it does say:
"Bank debt was down by $8.2 million with closing bank debt of $34.3 million."
which is down from last year's $42.5m (note 16, FY2008 report).
However there will be other liabilities as well. Other liabilities include trade creditors, other creditors and accruals, employee entitlements and indirect and other taxes. Last year that lot amounted to an extra $27.4m.
When a company is evaluated by banks they look at *all* the company's debts, not just the bank loans. So total liabilities as at 28-02-2009 look to me to be close to $61.7m. Further Balance, you should note that eventually *all* of these liabilities have to be paid or refinanced, not just the 'net liabilities'.
We also learn that total assets are now valued at $101.3m. So if we take my figure of total liabilities as correct and your figure, Balance, of goodwill as being correct, that leaves total net tangible assets of:Quote:
Banks are now falling over themselves to lend to RBD. Goodwill totals $23.6m.
$101.3m - $23.6m - $61.7 = $16m
If the goodwill is written off, $16m becomes the net total assets. Stacked up against debts of $61.7m, that would not put RBD in a strong capital position.
There *is* a breakdown of goodwill Balance, on p49 of the FY2008 Annual Report. There you can see total goodwill listed at $21.49m, of which 98.3% relates to Pizza Hut. Furthermore that $20.14m relates only to that part of the Pizza Hut business on which the franchise agreements are being renegotiated right now, because *those* Pizza Huts are the Pizza Huts that once formed the Eagle Boys chain in New Zealand that was purchased lock stock and barrel by Restaurant Brands.Quote:
No breakdown (of goodwill) but PH cannot be more than half that. Meanwhile, goodwill on KFC can be restated higher if allowed as the chooks are definitely flying out the door.
From your comments Balance, I think you have a fundamental misunderstanding of what goodwill is. Goodwill appears on the balance sheet of a company when that company purchases an asset at a higher price than the building blocks of that asset would sell for on the open market. That sounds a bit technical, so let's try a more real example.
Suppose I open "Snoopy's Fast Fouls" fried chicken shop. I spend $500,000 on a block of land and build a dine in restaurant for $1m. A couple of years down the track RBD decides to buy me out to turn it into a KFC and pays me $2m. The difference between the value of my business on the books -$1.5m- and what RBD paid me - $2m- is goodwill that will appear on the purchaser's books. In this case $0.5m.
You might rightly ask, why would RBD pay me $2m when they could build their own equivalent restaurant for $1.5m? Several reasons. First of all good sites, on busy streets with good access are not always easy to get. In buying an existing restaurant RBD would circumvent any planning issues plus obtain the good site thay wanted. RBD would also be buying my customer base, those regulars who come in week after week. That would negate the need to spend lots of promotional money battling it out in a highly competitive market to win customers from other businesses. Thus while the $0.5m in goodwill is intangible in a techical sense, it is very real to RBD because as a result of purchasing my business, RBD are purchasing an income stream over and above the bricks and mortar that I built.
Goodwill can only appear on the books of a business as a result of one business buying another. Thus your statement, Balance, that:
"goodwill on KFC can be restated higher if allowed as the chooks are definitely flying out the door."
could not be more wrong. It is absolutely 100% incorrect.
Of course this may be a moot point because banks are more concerned with cashflows, and goodwill does not affect cashflow. But generally banks will consider a company's cashflow *and* its capital position. There is no argument from me on RBD's cashflow position Balance - it is good. But I do think my point about RBD's capital position - if that goodwill is written off - is valid.
Balance, RBD have already announced their FY2009 annual results (to 29th February) and Pizza Hut is not only making losses, it is making EBIT losses. So your assertion that the upcoming announcement will show Pizza Hut making a profit means that RBD will have to declare that serious mistakes were made in last months announcement. Furthermore for current year guidance, we will have to wait until the end of May before the first quarter of the new year's sales figures are recorded, let alone released. It is impossible for me to conceive that Pizza Hut will be trumpeted as making a profit within the next fortnight in these circumstances. In fact the retired George Bush announcing he is now going to live on Mars is IMO more likely than what you are predicting. Are you sure you are not suffering from a little irrational exhuberance, Balance, as regards your shareholding in RBD?Quote:
Announcement is imminent and imvho, will also show PH turning a profit and that's why insiders (legally) have been buying.
Don't get me wrong, I think you will do well. But I don't think the sky is a blue as you make it out to be.
SNOOPY
discl: a fellow RBD shareholder, but not willing to buy more until after 'the announcement'.