Seeds of Destruction: Part 2.2 - A lack of interest
Quote:
Originally Posted by
Snoopy
The problem with estimating an interest rate equivalent for the PGW debt is that company debt quite seasonal, as the table below shows:
|
FY2018 |
HY2018 |
FY2017 |
Short Term Debt |
$30.806m |
$91.215m |
$26.719m |
Long Term Debt |
$149.205m |
$130.634m |
$110.925m |
Total |
$180.011m |
$221.849m |
$137.664m |
We can calculate a linear approximation average of the total debt as follows:
($180.011m + $221.849m + $137.664m)/3= $179.834m
Over the year the 'interest funding expense' (AR2018 note 7) was $10.235m. (Note that I am leaving out the foreign exchange changes which I don't believe are representative of true funding costs.)
So the indicative interest rate that PGW pays on the average outstanding balance is:
$10.235m / $179.834m = 5.7%
If as a result of the seeds transaction $100.5m is repaid, then interest will no longer have to be paid on that amount into the future. The total interest saved on an annual basis for 'PGW Rural Rump' will therefore be:
0.057 x $100.5m = $5.73m
How does this saving in interest payments translate to the profitability of 'PGW Rural Rump' going forwards?
The seasonal variation in historical company debt continues, as the table below shows:
|
HY2019 |
FY2018 |
HY2018 |
FY2017 |
Short Term Debt |
$79.635m |
$30.806m |
$91.215m |
$26.719m |
Long Term Debt |
$130.000m |
$149.205m |
$130.634m |
$110.925m |
Total Debt {A} |
$209.635m |
$180.011m |
$221.849m |
$137.664m |
Half Year Increment |
+$29.624m |
|
+$84.185m |
|
It is insightful to compare the changes in debt with the variation in 'Net Working Capital' over the same period.
Net Working Capital Calculation |
|
HY2019 |
FY2018 |
HY2018 |
FY2017 |
Trade & Other Receivables |
$423.242m |
$267.627m |
$365.924m |
$230.022m |
Finance Receivables |
$0m |
$0.733m |
$0m |
$0m |
Go Livestock Receivables |
$30.958m |
$39.419m |
$28.683m |
$32.371m |
Inventories |
$281.627m |
$262.538m |
$242.677m |
$253.600m |
Biological Assets |
$8.079m |
$0.911m |
$1.957m |
$1.611m |
Accounts Payable and Accruals |
($353.572m) |
($267.296m) |
($301.837m) |
($253.600m) |
Income Tax Payable |
($0m) |
($6.751m) |
($8.115m) |
($4.115m) |
Net Working Capital {B} |
$390.334m |
$297.181m |
$329.289m |
$259.889m |
Total Debt/Net Working Capital
|
HY2019 |
FY2018 |
HY2018 |
FY2017 |
{A}/{B} |
53.7% |
60.6% |
67.4% |
53.0% |
The unanswered question is, will the extra $57m that it was suggested be paid out to shareholders as a capital return, now be ploughed back into the company, in addition to the $100.5m previously set aside for debt repayment to enable a genuine all season 'lack of interest' going forwards?
SNOOPY
Seeds of Destruction: Part 4.1 - Fallout from 'The great capital shuffle'
Quote:
Originally Posted by
Snoopy
Immediately after the AGM the PGW share price was 57c. If we take this as Mr Market's 'reference figure', then this 57c will be split into a capital payout amount and the remainder which is Mr Market's worth of 'PGW Rural Rump'.
There are 754.048m PGW shares on issue. So working through both scenarios, for each share held, PGW shareholders can expect a capital repayment of either:
$292m / 754.048m = 38.7cps OR $274m / 754.048m = 36.3cps
By simple subtraction from the 57c PGW market value, we can now calculate the market value of 'PGW Rural Rump' after the seeds have split.
57c - 38.7c = 18.3c OR 57c - 36.3c = 20.7c
This gives us the information we need to work out post split PE ratios and dividend yields for both scenarios.
Closing PGW share price was 52c today. If we take this as Mr Market's 'reference figure', then this 52c will be split into a capital payout amount and the remainder which is Mr Market's worth of 'PGW Rural Rump'.
There are 754.048m PGW shares on issue. So working through both scenarios, for each share held, PGW shareholders can expect a capital repayment of either:
$235m / 754.048m = 31.2cps
By simple subtraction from the 52c PGW market value, we can now calculate the market value of 'PGW Rural Rump' after the seeds have split.
52c - 31.2c = 20.8c
This gives us the information we need to work out the post split PE ratio.
SNOOPY