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  1. #5781
    percy
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    Quote Originally Posted by Snoopy View Post
    Yes, that is what I took Ferg's comments to mean.



    No they don't give you the information directly. But there is enough segmented information given to allow you to work the segment margin out, which is what I have done in posts 5773, 5774 and 5775.

    SNOOPY
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    Last edited by percy; 16-06-2024 at 12:11 PM.

  2. #5782
    percy
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    Quote Originally Posted by Snoopy View Post
    I agree Percy that a 6.9x stock turn at those PGW retail stores does not 'feel' right. Your 'bulk stock that never comes through the store' could be one explanation. But might I suggest another. Perhaps PGW has an arrangement with many suppliers where stock is supplied in a consignment arrangement whereby PGW don't actually 'own' the stock until it is sold. The extreme example of this is the supermarkets, where the big players end up not paying for the goods until the end line customer has bought it. Turnover at the supermarkets is much higher than at a PGW retail store of course. But there is nothing to say the strong arm of PGW the retailer is not at work here.

    "We will generously allow your stock to be displayed at our retail stores, but don't expect us to pay for it Mr Chump supplier unless it goes out the door."

    PGW would no doubt pay up front for the high turnover stuff, but some of the slower moving lines? Maybe not. So could it be that the stock you see 'not moving' at a PGW retail store is not yet owned by PGW, so is not on the books as inventory?

    SNOOPY
    Sounds sensible,however I very much doubt that would happen at PGW.
    My "in store' stock turns of between 1.5 and 2 maybe generous.I can not see Jacket,shirt or socks suppliers offering more than 60 days credit.
    The likes of Pak'n Save turn over a great deal of their stock weekly.
    Their logistics are incredible.Their ordering systems are integrated with their major suppliers.
    Similar systems are used by Bunnings..
    The only way I can see PGW stock turns being high are;
    a].Extended Credit is offered in Spring.And end of year stock level is very low.
    b]When farmer comes into store he buys $100 worth of displayed goods ,and orders $10,000 worth of Fencing/fertisliser or whatever, which is delivered ex supplier direct to the farm,never going near the PGW store.

  3. #5783
    Guru
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    I concur with Percy on this one

  4. #5784
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    Quote Originally Posted by Ferg View Post
    Also - I see the letter of credit facility is a "limit" of $3.77m not what has been drawn so you may want to amend your tables.
    Ferg, the full text you refer to is from p26 of HYR2024 and is here:

    "The syndicated facility agreement allows the Group, subject to certain conditions, to enter into additional facilities outside of the Company's syndicated facility. The additional facilities are guaranteed by the security trust. These facilities amounted to $6.77 million as at 31 December 2023.
    – Overdraft facilities of $3.00 million. This facility was undrawn at 31 December 2023 (undrawn at 30 June 2023, undrawn at 31 December 2022).
    – Guarantee, letters of credit and trade finance facilities of $3.77 million."

    There is no mention of the "Guarantee, letters of credit and trade finance facilities." being drawn or undrawn. What is mentioned is that the overdraft on the line above is undrawn. My impression is that the "Guarantee, letters of credit and trade finance facilities.' is drawn, because if it wasn't, PGW would have told us, like they did with the overdraft facility on the line above.
    I consider the "Guarantee, letters of credit and trade finance facilities" has been drawn, or should be thought of as such because such money can be called upon at any time, and there is nothing the banks can do or could have done about it. You say the letter of credit is a 'limit'. But that is your word. The word 'limit' is not mentioned in the quoted text. And if it were a limit, why pick such a strange number?: $3.77m? Why not just make the limit $4m? The mere fact the number is $3.77m is another hint to me that the $3.77m is already drawn. I could still be wrong about this. But you haven't convinced me that I am.

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    Last edited by Snoopy; 16-06-2024 at 05:40 PM.
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  5. #5785
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    Quote Originally Posted by Ferg View Post
    Question for you Snoopy - does PGW have debt denominated in a foreign currency?
    PGW source many of their product lines from overseas sources. The HY2024 report shows $265.312m "Accounts payable and Accruals". For the breakdown of what this figure might represent, you need to look at the equivalent entry in AR2023. Note 17 of AR2023 would suggest the majority of what is termed the "Accounts Payable and Accruals" are trade creditors. How many of these are overseas based is not directly disclosed. But this I believe is the extent of PGW debts denominated on foreign currency.

    There is an extensive section on 'Financial Instruments' held by PGW in AR2023, starting on p91. From p94
    "Foreign Currency Risk The group undertakes transactions denominated in foreign currencies and exposure to movements in foreign currency arises from these activities. The group manages this risk by using forward foreign exchange contracts to hedge foreign currency risks as they arise."

    Immediately following that statement there is a table titled "Foreign Currency Exposure Risk". The first part of that table shows that the amount of foreign money owed to 'trade creditors', greatly exceeds the foreign money that is expected to come in from 'trade receivables', all as shown on the balance sheet. But below that, there is a line showing foreign exchange cover across four currencies (GBP,USD,AUD,Euro) to the total value of $42.787m. The same table contains another line of figures showing a net unhedged position that sums to $55.606m.

    The balance sheet contains trade creditors to the value of $105.679m. (AR2013 p87). So my interpretation of this is that of the trade creditors ($42.787m+$55.606m=)$98.393m are overseas based. Of those creditor accounts, a bit under half, $42.787m, are hedged back to the NZD. And $105.679m-$98.393m=$7.286m of the creditor accounts are NZD based, and probably local suppliers. That is how I read the information as presented anyway. I am happy to be corrected if my interpretation is wrong.

    So that sums up PGW's total exposure to foreign currency.

    But if your question is related to 'working capital' or 'long term capital' funding via the banking syndicate, then no, PGW do not have any foreign debt funding of that type.

    SNOOPY
    Last edited by Snoopy; 16-06-2024 at 09:24 PM.
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  6. #5786
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    Default Expense Control (FY2023 perspective)

    Quote Originally Posted by Ferg View Post
    The other thing I would be looking at is how does a decline in top line revenue impact NPBT given gross margin of 24.2% has fallen slightly compared to last year, and there are about ($139+58+30+10=) $237m of forecast fixed costs above the NPBT line.
    I couldn't find the above series of numbers last night. I think it is because they were rounded. Referred annual figures from FY2023 from HYR2024 p17 Interim Consolidated Statement of Profit & Loss are close:


    FY2023 Annual Fixed Costs
    Employee Expenses $137.561m
    Other Operating Expenses $54.590m
    Depreciation & Amortisation Expense $28.063m
    Net Interest and Finance Cost $9.573m
    Total Fixed Running Costs $229.787m

    That is a little different to your $237m total. But I think we are talking about the same figures. I guess the question is, can any of these fixed costs be reasonably reduced? Falling interest rates plus using cashflows that might otherwise have gone towards paying dividends to shareholders to reduce the loan balance should soon help.

    There has been quite a large IT spend been going on at PGW, which I believe is nearing completion. So while that will not reduce and may even increase depreciation charges for FY2025, these are non cash items in any prospective income statement. So I expect some of the cashflow from FY2024 that has been pouring into computer equipment will in the future be available to pay down debt.

    Employee expenses in a high inflation environment, can only really be reduced by sacking people, or putting on a 'hiring freeze'. This would result in customer service issues in the medium term which is unlikely to be good.

    So in summary, I think there is light at the end of the tunnel from a cashflow perspective, if not a profit perspective.

    SNOOPY
    Last edited by Snoopy; 17-06-2024 at 10:49 AM.
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  7. #5787
    Speedy Az winner69's Avatar
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    Só 130 page AR and you guys still have difficulty in finding answers ….PGW, not good enough
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  8. #5788
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    Quote Originally Posted by winner69 View Post
    Só 130 page AR and you guys still have difficulty in finding answers ….PGW, not good enough
    p130 of the Annual Report is the back cover with two farmers (or is it one farmer and a PGW rep) walking off into the cloudy reaches of a drying landscape. Maybe a hidden message for shareholders, that this path - walking away - is the path shareholders should take as well? So the Annual Report was perfectly clear after all. It is just that no-one noticed, until today.

    SNOOPY
    Last edited by Snoopy; 17-06-2024 at 10:46 AM.
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  9. #5789
    Speedy Az winner69's Avatar
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    Hey snoops I read that post too quickly and got this


    p130 of the Annual Report is the back cover with two farmers (or is it one farmer and a PGW rep) walking off into the cloudy reaches of a dying company. Maybe a hidden message for shareholders
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  10. #5790
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    Quote Originally Posted by Ferg View Post
    The other thing I would be looking at is how does a decline in top line revenue impact NPBT given gross margin of 24.2% has fallen slightly compared to last year, and there are about ($139+58+30+10=) $237m of forecast fixed costs above the NPBT line. Following is a table of the sales value needed to break even assuming fixed costs of $237m, and a range of gross margins:
    • 24% GM -> breakeven annual sales is $987m which requires H2 sales to grow +9% over H2 last year
    • 24.5% GM -> breakeven annual sales is $967m (H2 +4% vs LY)
    • 25% GM -> breakeven sales is $948m (H2 -1% vs LY)
    • 25.5% GM -> breakeven sales is $929m (H2 -5% vs LY)
    • 26% GM -> breakeven sales is $912m (H2 -10% vs LY)


    What this tells me is even if they can lift their H2 margins such that the FY gross margin is 26% (last year 25.9%) then a fall in annual topline sales of 10% for H2 will result in zero NPBT. A fall greater than that will result in a loss.
    Just figuring out where some of the above numbers came from. Refer to the 'Interim Consolidated Statement of Profit and Loss' for HY2024 for the input figures below.

    Gross Margin = (Revenue - Cost of Goods Sold) / Revenue

    Gross Margin FY2023 = ($975.692m - $722.849m)/$975.692m = 25.9%

    Gross Margin HY2023 = ($585.756m - $441.463m)/$585.756m = 24.6%
    Gross Margin HY2024 = ($560.878m - $425.247m)/$560.878m = 24.2%


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

    (Gross Margin)(Revenue) = (Revenue - Cost of Goods Sold)

    Assuming a Gross Margin of 24% and using the FY2023 figures as a base:
    0.24xR = (R-$772.849m) => 0.76R = $772.849m => R= $1,017m

    Actual operating revenue was $975m over FY2023, but gross margin, at 24.2%, was higher than that modelled above.
    Last edited by Snoopy; 17-06-2024 at 01:40 PM.
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