sharetrader
Page 80 of 106 FirstFirst ... 307076777879808182838490 ... LastLast
Results 791 to 800 of 1058
  1. #791
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default NPAT Estimate for FY2020: Deriving Numbers

    Quote Originally Posted by Snoopy View Post

    But will things get better in FY2020?
    "We have reduced our cost base, and geared the business to return 4% to 6% EBITDA on turnover approaching $120 million." (AR2019 p14)

    This implies the business is now set up to be profitable at an EBITDA of $4.8m to $7.2m.

    Cost Savings

    There is no easy way I can see to figure out the quantum of the referred to cost savings. One cost we do know about that should be saved next year is the $1.5m that was paid to overseas workers who could not be redeployed when the contracts they were working on fell over. (from 29th May media release). Next I am going to assume that CEO Bennett was able to take out $200,000 in annual costs out of Auckland, and $100,000 each out of Wellington and Christchurch. This adds up to losing a couple of staff in Wellington and Christchurch and four in Auckland for a total saving of $400,000. The bigger centres are likely where most of the big building project failures happened. So I think it is reasonable to assume some right sizing of the business might be appropriate in those cities.

    Interest Bill

    The net interest rate paid on last years (FY2019) shrinking average net loan balance can be estimated as follows:

    Interest Rate = $1.380m / 0.5x($29.731m + $26.643m) = 4.9%

    If we assume the average loan balance will be $3m lower over FY2020, and interest rates remain unchanged, then we can expect the FY2020 interest bill to be:

    0.049 x 0.5 x($26.643 + $23.643) = $1.232m

    Depreciation and Amortization

    The FY2018 figure was $3.445m. I propose to use that again.

    Tax

    The corporate tax rate in NZ is 28%. But AWF seem to always pay close to 30% because they have various non-tax deductible expenses, So I propose to use a tax rate of 30%

    Now we have enough data to estimate an upper and lower bound NPAT figure for AWF for FY2020. So let's see what it all adds up to.

    SNOOPY
    Last edited by Snoopy; 18-06-2020 at 10:51 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  2. #792
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default NPAT Estimate for FY2020: The Calculation v1.0

    Quote Originally Posted by Snoopy View Post

    Now we have enough data to estimate an upper and lower bound NPAT figure for AWF for FY2020. So let's see what it all adds up to.
    Lower Estimate FY2020 Higher Estimate FY2020
    EBITDA $4.800m $7.200m
    add Unusual Expense Saving $1.500m $1.500m
    add Permanent Office Cost Savings $0.400m $0.400m
    less Net Interest Expense Paid ($1,232m) ($1.232m)
    less Depreciation and Amortization ($3.445m) ($3.445m)
    equals Net Profit Before Tax $2.023m $4.423m
    less Income Tax @ 30% ($0.607m) ($1.327m)
    equals Net Profit After Tax $1.596m $3.096m

    Note that I am assuming no underlying business growth 'year on year'.

    First Impression? These are fairly dismal predictions, even though the high guess is 50% higher than actually achieved in FY2019. Keep in mind too that the cashflow, which you can estimate by adding back in to the 'DA' figure (for FY2020, maybe not FY2021) is much better than the NPAT. There should be money there to maintain dividends at current levels, notwithstanding any new capital raised by the DRP.

    By putting my numbers out there so early I expect to be lauded as a hero (if I get it right) or pilloried as a fool (if I get it wrong). I don't really care either way. At least I have had a go!

    SNOOPY

    P.S. I am leaning towards my high estimate as the likely correct one.
    Last edited by Snoopy; 08-07-2019 at 08:31 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  3. #793
    Speedy Az winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    37,738

    Default

    Snoops ...that’s how much AWF going to make

    How much Madison / Absolute IT going to make?
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  4. #794
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default

    Quote Originally Posted by Snoopy View Post

    By putting my numbers out there so early I expect to be lauded as a hero (if I get it right) or pilloried as a fool (if I get it wrong). I don't really care either way. At least I have had a go!
    .
    Quote Originally Posted by winner69 View Post
    Snoops ...that’s how much AWF going to make

    How much Madison / Absolute IT going to make?
    Ah well my fall from grace didn't take long then. Might as well put on that dunces cap right now <;-p

    You are quite right Winner. I was fooled by the division AWF having the same name as the overall company AWF. I also first read about the AWF EBITDA forecast first in the press release which didn't make the distinction clear (it is more clear in the annual report itself). I have to admit I was struggling to figure out why Bennett's EBITDA forecasts for the whole group seemed so low. So I added back in a couple of one off fudge factors regarding changes to expenses. Thinking about it now it seems likely that Bennett has already accounted for those in his EBITDA forecasts for 'AWF'. So

    1/ I am going to take those fudge factors out out and put back the contribution from the surprisingly struggling Madison and the surprisingly healthy AbsoluteIT.
    2/ I am going to assume that Madison will continue to struggle while AbsoluteIT continues to improve, the net effect being zero growth in that 'white collar' division for FY2020.
    3/ I am going to put in the unallocated head office admin expenses which I don't think figure in those divisional EBITDA results.

    Let's see what happens.

    SNOOPY
    Last edited by Snoopy; 08-07-2019 at 09:00 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  5. #795
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default NPAT Estimate for FY2020: The Calculation v1.1

    Quote Originally Posted by Snoopy View Post

    Lower Estimate FY2020 Higher Estimate FY2020
    EBITDA $4.800m $7.200m
    add Unusual Expense Saving $1.500m $1.500m
    add Permanent Office Cost Savings $0.400m $0.400m
    less Net Interest Expense Paid ($1,232m) ($1.232m)
    less Depreciation and Amortization ($3.445m) ($3.445m)
    equals Net Profit Before Tax $2.023m $4.423m
    less Income Tax @ 30% ($0.607m) ($1.327m)
    equals Net Profit After Tax $1.596m $3.096m

    Note that I am assuming no underlying business growth 'year on year'.

    First Impression? These are fairly dismal predictions, even though the high guess is 50% higher than actually achieved in FY2019. Keep in mind too that the cashflow, which you can estimate by adding back in to the 'DA' figure (for FY2020, maybe not FY2021) is much better than the NPAT. There should be money there to maintain dividends at current levels, notwithstanding any new capital raised by the DRP.

    By putting my numbers out there so early I expect to be lauded as a hero (if I get it right) or pilloried as a fool (if I get it wrong). I don't really care either way. At least I have had a go!

    I am leaning towards my high estimate as the likely correct one.
    Thanks to Winner for pointing out a fairly fundamental error in iteration 1.0. I shall attempt to remove the halo of the dunces cap with this follow up post.

    From the 29th May 2019 press release:

    "Bennett said AWF had reduced its cost base, and was now geared to return 4% to 6% EBITDA on turnover approaching $120 million."

    So lower and upper bound estimates of EBITDA for AWF are as follows:

    $120m x 0.04 = $4.8m, $120m x 0.06 = $7.2m

    Since these figures already include the cost savings I was trying to estimate in my post 791, I have removed those from my updated calculation.

    Lower Estimate FY2020 Higher Estimate FY2020
    EBITDA (AWF Division) $4.800m $7.200m
    EBITDA (Madison/AbsoluteIT) $5.597m $5.597m
    less Head Office Admin and Expenses ($2.649m) ($2.649m)
    less Net Interest Expense Paid ($1,232m) ($1.232m)
    less Depreciation and Amortization ($3.445m) ($3.445m)
    equals Net Profit Before Tax $3.071m $5.471m
    less Income Tax @ 30% ($0.921m) ($1.641m)
    equals Net Profit After Tax $2.150m $3.830m

    Second Impression? It is looking like a slow crawl back from the construction industry supply profit bomb hole. At best profits will be back to FY2014 levels. But we have one more year of $2m odd in hidden amortizing customer relationship cashflows for FY2020. That means the amount of cash available to pay the dividend this year is $4.150m and $5.830m. Even with the growing number of shares on issue as a result of the DRP (let's say 36m in total by this time next year) that allows a 'dps' payment of 11.5c to 16.2c without 'borrowing from the bank to pay the dividend'. I have to admit that dividend payment might be looking shakey by FY2021. But Simon and his team will have had a couple of years 'reinventing the business for growth' by then. So all will be 'hunky dorey' by then, right?

    SNOOPY
    Last edited by Snoopy; 18-06-2020 at 10:51 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  6. #796
    Speedy Az winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    37,738

    Default

    Not a dunce Snoops ...I think they write things to confuse punters

    Just that your number if it was for the group was so low it couldn’t be true.

    Maybe they should change ticker to better reflect AWF Madison Group or whatever they call themselves.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  7. #797
    percy
    Join Date
    Oct 2009
    Location
    christchurch
    Posts
    17,222

    Default

    Yeah Right.!
    At $2.15 mil NPAT eps is .064 cps with a PE of 28.43.
    At $3.83 mil NPAT eps is 11.45 cps with a PE of 15.89..
    In either case the 16.2 cps dividend looks unsustainable.

  8. #798
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default Bad Debts at AWF 'not so bad'? (FY2019 Perspective)

    Quote Originally Posted by winner69 View Post
    Snoops .......do you think that one day things will go alright with Allied with having to report bad news

    Looks like profits going backwards again

    http://nzx-prod-s7fsd7f98s.s3-websit...389/288702.pdf


    Could call these one offs and show normalised profits going gangbusters so no worries
    It looks like the new NZ IFRS 9 standard on Financial Instruments will require the recognition of more losses by the likes of AWF on these labour contracts, whether these losses actually exist or not (from AR2019 p52):

    "',,,requires lifetime expected losses for trade and other receivables to be recognised from initial recognition of the receivable."

    Effectively AWF are being asked to use a 'probabilistic model', estimating their own write offs before they happen.

    To some extent AWF is already doing this. AWF runs a 'provision for impairment' that is permanently on the books.

    The extra provision from IFRS 9 for specifically 'trade receivables' (I take that to mean relating to the AWF sub brand?) is $0.371m (p71 AR2019). If we then move to the actual 'Provision for Impairment of Trade Receivables' (p53 AR2019), we can see that this extra $0.371m has gone straight in. In fact, following the write offs during the year, the 'Provision Impairment Balance' would have ceased to exist without this extra payment! Did the IFRS 9 standard change occur just in time to avoid a negative provisions coming onto AWF's books (if that is even possible)?

    I am a little uncomfortable with the concept of holding a 'provision for impairment' at all. By having such a thing, bad deals can be 'smoothed out' by making a small annual addition to the impairment provision. Yet inside the provision there is a whopping write down that does not affect that year's profit and loss statement. Actual write downs for 'Trade & Receivables' over the last few years, compared to the consummate changes in provisions, have lined up as follows:

    2014 2015 2016 2017 2018 2019 Row Sum
    Impairment Losses in P&L {A} ($0.358m) ($0.306m) ($0.510m) ($0.699m) ($0.655m) ($1.109m)
    Impairment Write backs P&L {B} $0.291m $0.137m $0.100m $0.228m $0.594m $0.360m
    Net Impairment in P&L {A}+{B} ($0.067m) ($0.169m) ($0.410m) ($0.471m) ($0.061m) ($0.749m) ($1.927m)
    Actual Trade & Receivables Write down ($0.088m) ($0.204m) ($0.163m) ($0.163m) ($0.815m) ($1.034m) ($2.291m)
    Provision for Impairment Balance $0.377m $0.342m $0.589m $0.897m $0.143m $0.229m

    Over time, the two 'added up' rows should sum to about the same total. We can see that the declared result has incorporated a lower loss than the actual figures written off. But over the years a difference of $0.364m is not material. The one thing that strikes me about this table is that the 'write backs' have been quite high. One way to interpret that is that the initial write offs were overly conservative. I guess that is a good thing.

    The end of year 'Provision for Impairment' balance is low enough that there can't be that much smoothing of write offs between years going forwards. I say that is good. What is not so good is that 'big impairment hits' will be felt against profits without delay - not great when you are struggling to reduce your debts! My gut feeling is that the 2019 provision balance, given it is now meant to reflect probabilistic losses that might occur, is now too low.

    SNOOPY
    Last edited by Snoopy; 07-06-2021 at 12:46 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  9. #799
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default 'AWF Madison' AWF division 'gets the blues'. (FY2019 Perspective)

    Quote Originally Posted by winner69 View Post
    Snoops .......do you think that one day things will go alright with Allied with having to report bad news

    Looks like profits going backwards again

    http://nzx-prod-s7fsd7f98s.s3-websit...389/288702.pdf


    Could call these one offs and show normalised profits going gangbusters so no worries.
    What anyone sees as 'one off' charges' are usually a matter of opinion. Nevertheless, with all the turmoil in the construction sector, it might be worth adding all the write downs back onto the 'AWF Division' profit, to see what profits might have done if the construction sector had not 'gone bad'.

    Quote Originally Posted by Snoopy View Post
    It looks like the new NZ IFRS 9 standard on Financial Instruments will require the recognition of more losses by the likes of AWF on these labour contracts, whether these losses actually exist or not (from AR2019 p52):

    "',,,requires lifetime expected losses for trade and other receivables to be recognised from initial recognition of the receivable."

    Effectively AWF are being asked to use a 'probabilistic model', estimating their own write offs before they happen.
    2014 2015 2016 2017 2018 2019
    AWF EBIT {A} $7.471m $7.498m $7.067m $8.726m $4,858m $1.260m
    Actual Trade & Receivables Writedowns {B} ($0.088m) ($0.204m) ($0.163m) ($0.163m) ($0.815m) ($1.034m)
    No redeployment of Overseas Workers (saving) {C} $1.500m
    AWF EBIT - Writedowns {A}-{B}+{C} $7.559m $7.702m $7.230m $8.889m $5.673m $3.794m

    This table indicates that just being more diligent in choosing the short term labour contacts that you wish to help with is not going to fix things. CEO Bennett realizes this and has already announced an unspecified amount of background cost cutting. How much of the EBIT decline is due to the adoption of the new probabilistic bad debt model under IFRS 9 in FY2019? The answer is none, because I have used 'actual write off figures' in the above table.

    SNOOPY
    Last edited by Snoopy; 14-06-2020 at 10:33 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  10. #800
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default Updating the banking covenants (FY2020e perspective)

    Quote Originally Posted by Snoopy View Post
    The actual figures are out for FY2019 and I have been proved wrong in my estimates.

    Financial Year 2015 2016 2017 2018 2019
    EBITDA (Snoopy produced *) {B} $12.729m $11.945m $12.751m $11.751m $7.679m
    Finance Cost {C} $2.109m $1.333m $1.193m $1.297m $1.380m
    Interest Coverage {B}/{C} (target >3) 6.0 9.0 10.7 9.0 5.6
    Net Bank Debt {D} $18.608m $21.870m $32.383m $29.731m $26.643m
    Leverage ratio {D}/{B} (target <3) 1.5 1.8 2.5 2.5 3.5

    (* I calculated EBITDA from the income statement using the formula: EBITDA = NPBT + I + DA)

    The table below has been used to calculate the covenant figures for the composite twelve months made up from the second half year of FY2018 and the first half year of FY2019.

    Financial Year HY2018 2018 2HY2018 {A} HY2019 {B} 2HY2018+HY2019 {A}+{B}
    EBITDA (Snoopy produced *) {B} $7.093m $11.751m $4.652m $5.152m $9.810m
    Finance Cost {C} $0.741m $1.297m $0.556m $0.637m $1.193m
    Interest Coverage {B}/{C} (target >3) NM 9.0 NM NM 8.2
    Net Bank Debt {D} $23.183m $29.731m $29.731m $27.331m $27.331m
    Leverage ratio {D}/{B} (target <3) NM 2.5 NM NM 2.8

    That EBITDA banking debt covenant has been broken for FY2019! No comment I can see in the annual report about this, other than:

    "The banking facilities require the group to operate within defined financial undertakings. The group has complied with all covenant requirements during the year."

    The above statement appears to be untrue! Perhaps paying down $3m of the once $36m debt is enough to keep the ASB satisfied?
    Financial Year 2015 2016 2017 2018 2019 2020e (low) 2020e (high)
    EBITDA (Snoopy produced *) {B} $12.729m $11.945m $12.751m $11.751m $7.679m $10.397m $12.797m
    Finance Cost {C} $2.109m $1.333m $1.193m $1.297m $1.380m $1.232m $1.232m
    Interest Coverage {B}/{C} (target >3) 6.0 9.0 10.7 9.0 5.6 8.4 10.3
    Net Bank Debt {D} $18.608m $21.870m $32.383m $29.731m $26.643m $23.643m $23.643m
    Leverage ratio {D}/{B} (target <3) 1.5 1.8 2.5 2.5 3.5 2.3 1.8

    (* I have calculated EBITDA from the income statement using the formula: EBITDA = NPBT + I + DA)

    This means if Bennett's forecast figures for AWF in FY2020 can be believed and the white collar side of the business remains steady, then the banking covenants are 'back on track'. I wonder if we will get a first quarter update on FY2020 at the AGM on Wednesday?

    The dividend reinvestment plan raised a useful $1.6m in new capital over FY2019. Trade and other receivables verses the equivalent payables were well controlled in FY2019.

    Trade Receivables {A} Trade Payables {B} Net Receivables {A}-{B}
    FY2018 $41.101m $28.527m $12.574m
    FY2019 $32.629m $24.186m $8.443m

    Net receivables were down by $4.131m year on year. This was a key factor in allowing AWF to pay back $3m in debt.
    Will 'Trade and Other receivables' be as well collected in FY2020: i.e. another incremental improvement? That will be something to look out for.

    SNOOPY
    Last edited by Snoopy; 01-11-2021 at 12:26 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •