I'm not sure I agree with the conclusion there was no impact on FY20. Lost margin is lost margin (per your calc $8.4m). Whilst the wage subsidy was banked a portion of it was paid to employees and there were unfunded overheads. We need to look at all the variables.
The wage subsidy of $10m is in 2 parts. First part (5/12ths of $10m) paid a portion of wages during lockdown with a nett negative effect given the subsidy did not fund 100% of wage payments (another loss of what - $1m?). The second part (ie the 7 weeks funding post lockdown of about $5.8m) would have positive impact given it went into the "general pot" post lockdown. But overheads incurred during lockdown were unfunded (5/52ths of {$134m less W&S of $45m} less say 20% saving = 9.6% of $89m x 80%} of about $6.8m loss. Note IFRS16 muddies these waters so overheads includes interest on leases. Then there was another lockdown which would have cost HLG but is outside the scope of FY20.
Impact on FY20 (back of the fag packet) suggests:
- Lost margin -$8.4m
- Part 1 wage subsidy loss est. -$1m
- Part 2 wage subsidy gain of +$5.8m
- Unfunded overheads -$6.8m
- Total impact = -$10.4m
If we look at the annual report, NPBT fell $2.7m off the back off fundamentally the same sales YoY so there was an impact somewhere because that result includes $10m of COVID funding. Note I am using NPBT to account for IFSR16 changes.
Net profit movement reconciliation:
- HLG lost -$2.7m in FY20 vs FY19 with the same sales
- Add back lost raw GP FY20 (HLG fault, not COVID) +$3.3m
- Add back extra lost raw GP FY20 (at 5/52ths of the above) +$0.3m
- Add back lower non-operating income $0.7m (not COVD fault)
- Deduct wage subsidy funding (W&S reduced by subsidy per AR) -$10m
- Subtotal = -$8.4m (this would have been the change in profit without the subsidy and assuming the GP % was the same)
Note the subtotal above is the impact before accounting for lost sales and margin. This figure is your estimated lost margin of $8.4m.
Normalised impact is:
- Impact per part 1 above -$10.4m
- Remove impact of lower YoY margins +$3.3m
- Add annualised impact of lower margins +$0.3m
- Remove impact of non-operating income +$0.7m
- Nett "normalised" impact is loss of $6.1m
Whichever way you look at it there was a cost to HLG. It was either either $10.4m (raw), $6.1m (normalised) or $2.7m per the AR.