IPL - Investore Property

[kiwikeith]

The thing is, IPL does throw off not insignificant cash, and takes advantage of our PIE tax laws which allows them to pay unit holders more than their earnings indefinitely. This is a gift from the NZ government, only partially wound back by Nicola Willis clamping down on (some) of the depreciation top up payouts.


Back to your argument about the NASDAQ being the index that NZ investors should follow? Different market, different risk and cashflow issues with FIF so less tax friendly. Not saying don't do it, but come meal time, I like variety in my PIEs.

SNOOPY[/QUOTE]


Yes the tax situation between NZ pies and US shares is pretty stark. On the former you can get decent dividends with no further tax to pay. On the latter you can receive minimal dividends and pay NZ tax on a hypothetical dividend.

[percy]

Perhaps Woolworths will be looking for reduced rent.?
https://www.rnz.co.nz/news/business/...ast-six-months

[Snoopy]

This depreciation charge being allowed to be paid out as a tax paid dividend still does my head in. But I have realised that although I have now allowed for 'building structural depreciation' to be paid out, I did not consider the possibility of the 'depreciation on building fit out' to be paid out. So let's adjust for that too to try and bridge that gap between 'earnings'(sic) and dividends paid.

Building Depreciation Allowed FY2021,FY2022, FY2023	FY2019	FY2020	FY2021	FY2022	FY2023	5 year Total
Dividends Paid during Financial Year (1)	$19.676m	$20.701m	$27.980m	$28.808m	$29.050m	$126.705m
less Dividends reinvested during year (2)	$0.0m	$0.0m	$0.0m	$0.0m	$0.0m	$0.0m
equals Net dividends paid during year	$19.676m	$20.701m	$27.980m	$28.808m	$29.050m	$126.705m
Profit before other expense/income and income tax (as declared)	$26.993m	$26.749m	$29.949m	$34.265m	$35.207m
less Depreciation Charge	$6.621m	$6.171m	$15.600m	$15.932m	$15.229m
equals IRD Profit before other expense/income and income tax	$20.372m	$20.578m	$14.349m	$18.333m	$19.908m
less Income Tax expense @ 28%	$5.760m	$5.762m	$4.018m	$5.133m	$5.574m	$26.247m
equals IRD Operational Net Profit After Tax (3)	$14.617m	$14.816m	$10.331m	$13.200m	$14.334m	$67.298m
add Cashflow from 'Structural Depreciation' not reinvested	$0m	$0m	$9.400m	$9.732m	$9.029m
add Cashflow from 'Building fit out' not reinvested	$6.621m	$6.171m	$6.200m	$6.200m	$6.200m
'Cash Earnings' available for distribution	$21.238m	$20.987m	$25.931m	$29.132m	$29.563m	$126.851m

Notes

1/ Dividends paid and dividends reinvested over the financial year are taken from each respective 'Consolidated Statement of Changes in Equity' in the Annual Reports.
2/ There was no dividend reinvestment plan offered over the period being analyzed.
3/ Refer post 183.



-------------------------

'At last' I have got the 'cash earnings' to match the 'dividends'. But do I really believe it? Not sure. But at least when the I see the figures written down as I have done, is that not evidence, in itself, that it is all true?

The coming law change regarding the removal of the ability to offset 'structural building depreciation' will have a negative effect on cash flows (because the government takes more tax) , and hence potentially dividends going forwards. Given it is only the ability to offset 'structural building depreciation' that is being mooted as being disallowed, then that effect may not be as great as some think on the overall dividend payout picture.

As an example of this, take FY2023. In this year there was a depreciation charge of $15.229m which 'apparently was able to be added back to the PIE dividend stream of unit holders. The 'Horror of horrors' for property investors is that it is National Party Policy to abolish 'building depreciation' from future tax periods. But if it is only 'structural building depreciation' no longer allowed as a deduction, that means the remaining depreciation is still allowed to be paid out as a supplementary dividend payment. So rather than the supplementary dividend payout dropping from $15.229m to zero, instead it drops from $15.229m to $6.200m. Yet the real drop is unlikely to be even that large. Why? Because removing structural depreciation as a deduction will also increase the profits of IPL that are able to be distributed.

If we assume a new regime of 'structural depreciation disallowed' had applied to the FY2023 year, then the revised IRD recognised income calculation would have been as follows:

Profit for FY2023 before other expense/income and income tax (as declared)	$35.207m
less Depreciation Charge Allowed	$6.200m
equals IRD Profit before other expense/income and income tax	$29.007m
less Income Tax expense @ 28%	$8.122m
equals IRD Profit before other expense/income and after income tax	$20.885m
add Cashflow from 'Building fit out' not reinvested	$6.200m
equals Cash earnings available for distribution	$27.085m

Thus the distribution lost because of the new tax rules would have amounted to: $29.563m-$27.085m=$2.478m
OR $2.478m/367.503m= 0.67cpu

The actual distribution over FY2023 was 4x1.975cpu = 7.9cpu. So the amount of unit holder income that would have been lost, had these tax rules been in place, would have amounted to 0.67/7.9= 8.5% of the pre-tax adjustment total.

When I write this stuff I can't help look at that five year summary of tax paid payouts of $126.705m against underlying earnings of $67.298m and wonder when the scammer who allowed the switching of this tax burden from the rich property investor to the 'squeezed middle' will 'turn himself in'. But will the Commissioner of Inland Revenue ever turn himself in? With Nicola Willis giving him the big tick, probably not.

SNOOPY

[Snoopy]

Perhaps Woolworths will be looking for reduced rent.?
https://www.rnz.co.nz/news/business/...ast-six-months

23 rats caught at Countdown Dunedin last week, and $200k lost revenue over that week as the central Dunedin store remained closed. Those are quite expensive rats! Just as well it is Woolworths losing the money though, as Investore does not get paid on store turnover --- oh wait.....

SNOOPY

[stoploss]

23 rats caught at Countdown Dunedin last week, and $200k lost revenue over that week as the central Dunedin store remained closed. Those are quite expensive rats! Just as well it is Woolworths losing the money though, as Investore does not get paid on store turnover --- oh wait.....

SNOOPY

Snoops 200 k revenue or Profit ????

[Snoopy]

Snoops 200 k revenue or Profit ????

Funny you should mention that as I made my post after hearing an audio news clip, and had to think again as to whether they said revenue or profit. I think the figure was revenue, because I doubt Woolworths/Countdown would willingly disclose profit figures for competitive reasons. If it was profit, and that $200k per week was typical, it means we are talking about a profit of $0.2mx52= $10.4m for one Dunedin store for the year.

The article linked to by percy claimed that the profit in the last 6 months at Woolworths NZ was $71m, or $142m annualised. There are 191 Countdown/Wookworths stores across the country. So we are talking an average profit of $142m/191= $0.743m per store. It seems unlikely this Dunedin store would be earning over $10.4m/$0.743m = 14x more than the average store. So I am fairly sure the figure I posted was revenue, not profit.

SNOOPY

[stoploss]

Funny you should mention that as I made my post after hearing an audio news clip, and had to think again as to whether they said revenue or profit. I think the figure was revenue, because I doubt Woolworths/Countdown would willingly disclose profit figures for competitive reasons. If it was profit, and that $200k per week was typical, it means we are talking about a profit of $0.2mx52= $10.4m for one Dunedin store for the year.

The article linked to by percy claimed that the profit in the last 6 months at Woolworths NZ was $71m, or $142m annualised. There are 191 Countdown/Wookworths stores across the country. So we are talking an average profit of $142m/191= $0.743m per store. It seems unlikely this Dunedin store would be earning over $10.4m/$0.743m = 14x more than the average store. So I am fairly sure the figure I posted was revenue, not profit.

SNOOPY

Snoops this article mentions 10 mio a year profit from a PaK n Save , quite a few years back . These are the numbers I have heard , look at the NBR Wealth list ….Not sure you can trust the countdown numbers , 400 mio to change the name …
https://www.stuff.co.nz/business/350...tail-landscape

[Snoopy]

Snoops this article mentions 10 mio a year profit from a PaK n Save , quite a few years back . These are the numbers I have heard , look at the NBR Wealth list ….Not sure you can trust the countdown numbers , 400 mio to change the name …
https://www.stuff.co.nz/business/350...tail-landscape

Thanks for that reference stoploss. Interesting reading. The article says:
"It was estimated at one point that Glen Innes Pak’nSave was making $10m a year."

I am not sure how much credence you could give that statement. It sounds like a hyped up theoretical peak point maximum with no supporting evidence, if $10m is indeed NPAT. But since Tahua is private, we don't know what their debt structure is. So I suspect $10m is probably EBIT, or maybe EBITDA. I don't see how some commentator could come up with $10m per year, without inside knowledge. And there would be no reason to give a private commentator such inside knowledge.

Having said that, I don't doubt that Pak’nSave 's are much more profitable than Countdown's because Pak’nSave s are individually owned, and part of the Foodstuffs co-operative grouping. No high paid corporate infrastructure to serve like at Woolworths. Plus being an 'international corporate', there is a possibility of Woolworth's 'transfer pricing' inflating the cost base of Woolworths doing business in NZ. I haven't looked into this in detail. But all the numbers I previously quoted, bar the $200,000 from the radio broadcast, I pulled out of the Woolworths annual report.

$400m (albeit over 3 years) to transform Countdown into Woolworths does sound to be an extraordinary amount of money, I agree. But if Woolworths do spend that money, it would be a legitimate tax deductible expense.

Given all this, I can understand why you say you don't trust the Countdown/Woolworths numbers. But I think your statement is more a commentary on corporate charging practice, rather than the declared profit numbers being 'wrong' as such. Woolworths are clearly fulfilling all of their tax obligations and complying with the tax laws on both sides of the Tasman. The fact that each individual Countdown/Woolworths supermarket could be making a lot more money under a Pak'n save ownership structure is likely true. But it is not relevant to the actual tax structure under which Countdown/Woolworths operates.

Finally the NBR rich list must be speculative for valuing non-listed assets, and of necessity does not take account of private indebtedness needed to hold that estimated wealth, because such information is not publicly available.

SNOOPY