PGW - PGG Wrightson

[winner69]

They say — PGG Wrightson Limited* (PGW) Chairman Rodger Finlay announced today ahead of the annual shareholders meeting that “Whilst it remained too soon to provide firm guidance about expectations for FY2020, the Board reaffirmed confidence that PGW would achieve Operating EBITDA in excess of $30 million (before adjusting for the impact from the new accounting standard for leases: IFRS16).”

What’s the comparative for F19 after allowing for IFRS16

[Snoopy]

Guidance and dividend policy update is positive.
Pity I will miss today's agm.

Underlying NPAT for FY2019 was $10.987m (my post 4642) based on EBITDA of $28.725m. That is equivalent to eps of 14.6c. Dividend over the last year was the equivalent of 15cps. So dividends are already greater than underlying earnings, albeit 'in the ballpark'. If EBITDA rises to something above $30m that corresponds to an EBITDA increment of $1.175m. If all of that flows through to profit, then the incremental eps is:

($1.175m x 0.72) / 75.484m = 1.1cps

The forecast increase in interim dividend from 7.5cps to 8cps will be covered by this. As will an increase in final dividend to the same. So no real news in this mornings announcement, except that it looks like all earnings will be paid out as dividends into the future. The influence of Agria continuing?

It is a mathematically dodgy thing to do to extrapolate from a small number of data points. But if we take last years dividend of 15cps and link that in to a possible dividend of 16cps for FY2020, that makes for a 15.5cps average. If I use my pre-established gross required yield for this company of 8.5%, we can calculate a 'gross dividend capitalised valuation' of PGW as follows:

15.5c/ (0.72 x 0.085) = $2.53

That is fairly close to where the company is trading right now. The MDRT threat that I outlined in 4657 is real. But it will only become apparent if interest rates start to rise again. And as Stephen Guerin has announced a new lower more competitive interest rate he has negotiated with the banks, he has effectively kicked this 'debt threat' down the road.

SNOOPY

PS I have to miss this years AGM too :-(. I hope some sharetrader can report in!

[Snoopy]

They say — PGG Wrightson Limited* (PGW) Chairman Rodger Finlay announced today ahead of the annual shareholders meeting that “Whilst it remained too soon to provide firm guidance about expectations for FY2020, the Board reaffirmed confidence that PGW would achieve Operating EBITDA in excess of $30 million (before adjusting for the impact from the new accounting standard for leases: IFRS16).”

What’s the comparative for F19 after allowing for IFRS16?

Have a look at AR2019 Note 29h Winner. Under IFRS16, operating expenses are expected to decrease by $21.4m. But interest charges are expected to rise by $6m and depreciation goes up by $16m. By my maths this equates to a change in 'Net Profit After Tax' if IFRS16 had been in force over FY2019 of:

0.72 x ( $21.4m - $16.0m -$6.0m ) = -$0.432m

SNOOPY

[winner69]

Have a look at AR2019 Note 29h Winner. Under IFRS16, operating expenses are expected to decrease by $21.4m. But interest charges are expected to rise by $6m and depreciation goes up by $16m. By my maths this equates to a change in 'Net Profit After Tax' if IFRS16 had been in force over FY2019 of:

0.72 x ( $21.4m - $16.0m -$6.0m ) = -$0.432m

SNOOPY

So one has to be careful using EBITDA comparisons then ....making sure comparing apples to apples

[Snoopy]

So one has to be careful using EBITDA comparisons then ....making sure comparing apples to apples

I was going to agree with you unreservedly, until I realised that most of the changes that PGW have told us are coming because of IFRS16 concern an increase a $6.0m in interest payments (not relevant to Earnings Before Interest and Depreciation and Amortisation) and an increase in depreciation of $16.0m (not relevant to Earnings Before Interest and Depreciation and Amortisation).

However the decrease in expenses of $21.4m looks like it will stand in any revised EBITDA figure. So EBITDA going forwards will look like it has jumped considerably, even as NPAT has gone down. So yes it does seem that EBITDA will be significantly distorted by the adoption of IFRS16, and I do agree: An apples with apples comparison as regards EBITDA year on year looks like something we investors will have to be particularly careful with.

SNOOPY

[winner69]

Main thing Snoops is the $30m plus they say for F20 is comparable to the $28m reported for F19

That’s good eh ...esp if they seduce us with high dividends

And then a takeover is pretty likely as well.

[percy]

Positive seeing the share price up 3 cents to $2.51 after today's agm..
Reflects the market's confidence in PGW's new directors/management.

[Snoopy]

Positive seeing the share price up 3 cents to $2.51 after today's agm..
Reflects the market's confidence in PGW's new directors/management.

Not only that, I see it was bid up to $2.53 at the close. That neatly coincides with my latest 'capitalised dividend fair valuation'. Although possibly the rise is just as likely connected with the higher Fonterra payout announced yesterday.

Hey Percy, I thought you were steering clear of retail? What got you on board with this one?

SNOOPY

[percy]

A presentation I attended a year ago,gave me greater insight to their business model .[Although I have held PGW previously]
My book selling business I did from my garage.I went direct to libraries.Not like a retailer who waits for customers to come to them.
PGW's business is similar.PGW agents/reps call on their clients.Calling on a farmer/fruit grower etc client, they must be able to know all their clients needs, and work with their client so they achieve very good results.
The on going success of PGW is based on the advice,service their reps give.The trust they develop with their clients.
PGW have invested heavily in making sure their reps have all the technology at hand they need,so they give the right advice.

[Rossimarnz]

Is PGW's livestock business about to experience an 'Uber' like disruption? https://stockx.co.nz/ I appreciate there are other business channels within PGW but in many cases the relationships that these other business channels leverage are initially formed in the stock agent side of the business.