ALF - Allied Farmers Limited

**Muse** · 01-11-2023, 10:20 PM

Originally Posted by n908671

Help me get my head around this.

Is the inefficiency because of the tax losses carried over, they will not pay tax on profits until these losses are used up. Therefore there will be no imputation credits attached to the dividends so shareholders get hit the full whammy tax on the dividends.

You are on the right track.
In order to attach imputation credits, you must have paid tax / have tax paid income.
ALF is sitting on a massive pile of tax losses. Therefore, there is no tax to pay on its profit before tax, and thus can't attach imputation credits.
That doesn't stop the company from paying unimputed dividends. They are free to do so. Many do.
But the existence of those tax losses also provide a financial incentive for the company to potentially grow by acquisition, using sensible amounts of debt, as the cashflow from its operations will be quite strong (given it doesn't have to pay tax) and it can use those strong cashflows to quickly paydown any debt. I suspect that is why WAF has bought in. The nature of ALF's rural land management business is quite cashflow positive as well.

**blackcap** · 02-11-2023, 07:04 AM

Originally Posted by Muse

You are on the right track.
In order to attach imputation credits, you must have paid tax / have tax paid income.
ALF is sitting on a massive pile of tax losses. Therefore, there is no tax to pay on its profit before tax, and thus can't attach imputation credits.
That doesn't stop the company from paying unimputed dividends. They are free to do so. Many do.
But the existence of those tax losses also provide a financial incentive for the company to potentially grow by acquisition, using sensible amounts of debt, as the cashflow from its operations will be quite strong (given it doesn't have to pay tax) and it can use those strong cashflows to quickly paydown any debt. I suspect that is why WAF has bought in. The nature of ALF's rural land management business is quite cashflow positive as well.

The problem with companies that pay unimputed dividends, is that they have to pay the RWT amount to the IRD in cash. Effectively giving away cash for nothing. It is a losing situation in the NZ tax regime. It would be better for them to return cash via other means, like a share buy back or as Muse has pointed out, grow by acquisition. Or do what SKT did and pay back capital.

**golden city** · 20-11-2023, 11:38 AM

Share price performing better after acquisitions of shares

**nztx** · 21-11-2023, 09:04 PM

Cockies still smiling sweetly through the storm clouds .. or showing signs of getting nervous ?

Have to watch out for mysterious double or triple whammies that happen to just sneak up from
behind out of nowhere ..

hopefully not the sound of sh*t hitting multiple fans ..