Time to look forwards to the current year to see if there is any ongoing substance to this 'debt issue'. The first step is to forecast a 'net profit after tax' assuming that the EBITDA figure of $30m for FY2020 becomes reality.
|
PGG Wrightson Rural Rump FY2020f |
EBITDA |
$30.000m |
less DA |
$9.632m |
less I |
$3.826m |
equals EBT |
$16.542m |
x 0.72 equals NPAT {A} |
$11.910m |
No. shares on issue {B} |
75.484m |
eps {A}/{B} |
15.7c |
We have no clear idea of what the bank loan position, balance of money owing to employees or deficit of the pension plan will be on 30th June 2020. So I am using the indicative figures for PGW today after the capital return as estimates.
|
FY2019 (iter. 1) |
FY2020f |
Short Term Bank Lo]ans |
$3.920m |
$3.920m |
add Long Term Bank Loans |
$31.742m |
$31.742m |
add Net Defined Benefit Liability (Pension Plan deficit) |
$5.883m |
add Employee Entitlements |
$16.821m |
$16.821m |
Total Bank and Worriesome Liabiliities {A} |
$58.366m |
$58.366m |
NPAT + Impairment & Fair Value adj. {B} |
$7.187m (i) |
$11.910m |
Minimum Debt Repayment Time {A}/{B} (in years) |
8.12 |
4.90 |
Notes
Iteration i (Assuming Profits from Seed Sales paid through to Shareholders)
(i) Calculation of NPAT and 'Impairment & Fair Value Adjustments' (representing available cashflow for FY2019) is as follows:
FY2019: $4.000m+$3.187m = $7.187m
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My rule of thumb for the MDRT answer in years is:
years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern
So a figure of 4.9 is not a bad result, but neither is it good. It is better than the recent peak figure of the pre-split PGW from FY2018 (7.87), but worse than the four preceding years before that FY2017 (3.97), FY2016 (4.54), FY2015 (4.85) and FY2014 (3.28). I would describe PGWs current position as being 'one shock away from trouble'. Yes the potential gross dividend yield today may look attractive:
15.5c / ($2.46 x 0.72) = 8.8%
(Note: a 15.5c annual dividend represents a projected dividend payout ratio of 99%)
But this is not a bond substitute.
I would advise investors not to 'bet the farm' on PGW. But as part of a balanced income portfolio, where as an investor you are aware of what a farming downturn might do to this investment, I think a shareholding in PGW has its place.