HLG - Hallenstein Glasson

[BlackPeter]

Disc: I am having first slice of freshly delivered XMAS log roll and nobody is taking that away from me.

Eating and typing at the same time is a bad habit ... sticky fingers can do terrible things to keyboards but anyway - enjoy your early Christmas log roll before it melts away - or do you live these days in colder regions of the globe?

Merry Christmas ... to you and all the other great and helpful contributors on sharetrader!

[Ferg]

I’ve assessed HLG lost about $14m of sales during lockdown. Lost margin $8.4m offset by wage subsidies. No impact on profit in F20.

I'm not sure I agree with the conclusion there was no impact on FY20. Lost margin is lost margin (per your calc $8.4m). Whilst the wage subsidy was banked a portion of it was paid to employees and there were unfunded overheads. We need to look at all the variables.

The wage subsidy of $10m is in 2 parts. First part (5/12ths of $10m) paid a portion of wages during lockdown with a nett negative effect given the subsidy did not fund 100% of wage payments (another loss of what - $1m?). The second part (ie the 7 weeks funding post lockdown of about $5.8m) would have positive impact given it went into the "general pot" post lockdown. But overheads incurred during lockdown were unfunded (5/52ths of {$134m less W&S of $45m} less say 20% saving = 9.6% of $89m x 80%} of about $6.8m loss. Note IFRS16 muddies these waters so overheads includes interest on leases. Then there was another lockdown which would have cost HLG but is outside the scope of FY20.

Impact on FY20 (back of the fag packet) suggests:

• Lost margin -$8.4m
• Part 1 wage subsidy loss est. -$1m
• Part 2 wage subsidy gain of +$5.8m
• Unfunded overheads -$6.8m
• Total impact = -$10.4m

If we look at the annual report, NPBT fell $2.7m off the back off fundamentally the same sales YoY so there was an impact somewhere because that result includes $10m of COVID funding. Note I am using NPBT to account for IFSR16 changes.

Net profit movement reconciliation:

• HLG lost -$2.7m in FY20 vs FY19 with the same sales
• Add back lost raw GP FY20 (HLG fault, not COVID) +$3.3m
• Add back extra lost raw GP FY20 (at 5/52ths of the above) +$0.3m
• Add back lower non-operating income $0.7m (not COVD fault)
• Deduct wage subsidy funding (W&S reduced by subsidy per AR) -$10m
• Subtotal = -$8.4m (this would have been the change in profit without the subsidy and assuming the GP % was the same)

Note the subtotal above is the impact before accounting for lost sales and margin. This figure is your estimated lost margin of $8.4m.

Normalised impact is:

• Impact per part 1 above -$10.4m
• Remove impact of lower YoY margins +$3.3m
• Add annualised impact of lower margins +$0.3m
• Remove impact of non-operating income +$0.7m
• Nett "normalised" impact is loss of $6.1m

Whichever way you look at it there was a cost to HLG. It was either either $10.4m (raw), $6.1m (normalised) or $2.7m per the AR.

[arekaywhy]

I'm not sure I agree with the conclusion there was no impact on FY20. Lost margin is lost margin (per your calc $8.4m). Whilst the wage subsidy was banked a portion of it was paid to employees and there were unfunded overheads. We need to look at all the variables.

The wage subsidy of $10m is in 2 parts. First part (5/12ths of $10m) paid a portion of wages during lockdown with a nett negative effect given the subsidy did not fund 100% of wage payments (another loss of what - $1m?). The second part (ie the 7 weeks funding post lockdown of about $5.8m) would have positive impact given it went into the "general pot" post lockdown. But overheads incurred during lockdown were unfunded (5/52ths of {$134m less W&S of $45m} less say 20% saving = 9.6% of $89m x 80%} of about $6.8m loss. Note IFRS16 muddies these waters so overheads includes interest on leases. Then there was another lockdown which would have cost HLG but is outside the scope of FY20.

Impact on FY20 (back of the fag packet) suggests:

• Lost margin -$8.4m
• Part 1 wage subsidy loss est. -$1m
• Part 2 wage subsidy gain of +$5.8m
• Unfunded overheads -$6.8m
• Total impact = -$10.4m

If we look at the annual report, NPBT fell $2.7m off the back off fundamentally the same sales YoY so there was an impact somewhere because that result includes $10m of COVID funding. Note I am using NPBT to account for IFSR16 changes.

Net profit movement reconciliation:

• HLG lost -$2.7m in FY20 vs FY19 with the same sales
• Add back lost raw GP FY20 (HLG fault, not COVID) +$3.3m
• Add back extra lost raw GP FY20 (at 5/52ths of the above) +$0.3m
• Add back lower non-operating income $0.7m (not COVD fault)
• Deduct wage subsidy funding (W&S reduced by subsidy per AR) -$10m
• Subtotal = -$8.4m (this would have been the change in profit without the subsidy and assuming the GP % was the same)

Note the subtotal above is the impact before accounting for lost sales and margin. This figure is your estimated lost margin of $8.4m.

Normalised impact is:

• Impact per part 1 above -$10.4m
• Remove impact of lower YoY margins +$3.3m
• Add annualised impact of lower margins +$0.3m
• Remove impact of non-operating income +$0.7m
• Nett "normalised" impact is loss of $6.1m

Whichever way you look at it there was a cost to HLG. It was either either $10.4m (raw), $6.1m (normalised) or $2.7m per the AR.

I can hear the Donkey Teeth frowning from here

[Balance]

The Vueve Clicquot champagne is going to go down so very much better,

knowing

that there are two-faced hypocrites out there, walking around with hijabs stuffed in their posteriors,

spoiling their festive season with wage subsidy in their minds.

[Ferg]

Another way of looking at this:

Start with the AR 2020 NPBT $37m
Add missing margin per winner +$8.4m
Deduct COVID subsidies -$10m
Amended NPBT = $35.4m

This method shows HLG was heading for a lower NPBT before COVID struck, assuming the $8.4m is correct.

The lower profit can be see in the higher wage costs before COVID of $45m + $10m add back vs $51.7m in FY19 giving extra pre COVID costs of $3.3m. We also know the GP% was worse in FY20 by at least $3m. The change to IFRS16 had minimal impact.

One complicating factor is the lockdown periods were different in NZ vs Oz.

Winner - would you like to share your workings on the lost revenues of $14m?

[Beagle]

An itch which needed scratching but has now turned into a festering sore needing treatment for some posters, Beagle? They need to get a life before the sore becomes septic.

It is indeed the season of goodwill, so let’s wish them a merry time.

I have this strange bizarre feeling, there might be something slightly better to do at this time of year than endlessly debate this subject even more endlessly than it already has been

I'm not sure I agree with the conclusion there was no impact on FY20. Lost margin is lost margin (per your calc $8.4m). Whilst the wage subsidy was banked a portion of it was paid to employees and there were unfunded overheads. We need to look at all the variables.

The wage subsidy of $10m is in 2 parts. First part (5/12ths of $10m) paid a portion of wages during lockdown with a nett negative effect given the subsidy did not fund 100% of wage payments (another loss of what - $1m?). The second part (ie the 7 weeks funding post lockdown of about $5.8m) would have positive impact given it went into the "general pot" post lockdown. But overheads incurred during lockdown were unfunded (5/52ths of {$134m less W&S of $45m} less say 20% saving = 9.6% of $89m x 80%} of about $6.8m loss. Note IFRS16 muddies these waters so overheads includes interest on leases. Then there was another lockdown which would have cost HLG but is outside the scope of FY20.

Impact on FY20 (back of the fag packet) suggests:

• Lost margin -$8.4m
• Part 1 wage subsidy loss est. -$1m
• Part 2 wage subsidy gain of +$5.8m
• Unfunded overheads -$6.8m
• Total impact = -$10.4m

If we look at the annual report, NPBT fell $2.7m off the back off fundamentally the same sales YoY so there was an impact somewhere because that result includes $10m of COVID funding. Note I am using NPBT to account for IFSR16 changes.

Net profit movement reconciliation:

• HLG lost -$2.7m in FY20 vs FY19 with the same sales
• Add back lost raw GP FY20 (HLG fault, not COVID) +$3.3m
• Add back extra lost raw GP FY20 (at 5/52ths of the above) +$0.3m
• Add back lower non-operating income $0.7m (not COVD fault)
• Deduct wage subsidy funding (W&S reduced by subsidy per AR) -$10m
• Subtotal = -$8.4m (this would have been the change in profit without the subsidy and assuming the GP % was the same)

Note the subtotal above is the impact before accounting for lost sales and margin. This figure is your estimated lost margin of $8.4m.

Normalised impact is:

• Impact per part 1 above -$10.4m
• Remove impact of lower YoY margins +$3.3m
• Add annualised impact of lower margins +$0.3m
• Remove impact of non-operating income +$0.7m
• Nett "normalised" impact is loss of $6.1m

Whichever way you look at it there was a cost to HLG. It was either either $10.4m (raw), $6.1m (normalised) or $2.7m per the AR.

Excellent post. I put some of it in bright blue and highlighted it so the socialist lefties conducting their witch hunt can read it even with their one eyed myopic vision
It is a real pleasure having you join the forum this year. I look forward to reading your well considered posts in the future.

Poor Beagle: Definitely a Pavlovian Dog.
Disc: The mushrooms & other trimming on the XMAS log roll were made from pavlova.

Definitely salivating this year as my nephew who is one of Auckland's top chef's has moved into a new house and invited the whole Beagle clan around for Christmas lunch. Pretty sure Pavlova will be served as well

Merry Christmas to all and best wishes for the holiday season.

[nztx]

Another way of looking at this:

Start with the AR 2020 NPBT $37m
Add missing margin per winner +$8.4m
Deduct COVID subsidies -$10m
Amended NPBT = $35.4m

This method shows HLG was heading for a lower NPBT before COVID struck, assuming the $8.4m is correct.

The lower profit can be see in the higher wage costs before COVID of $45m + $10m add back vs $51.7m in FY19 giving extra pre COVID costs of $3.3m. We also know the GP% was worse in FY20 by at least $3m. The change to IFRS16 had minimal impact.

One complicating factor is the lockdown periods were different in NZ vs Oz.

Winner - would you like to share your workings on the lost revenues of $14m?

Excellent analysis there Ferg

My thoughts too - 100% of subsidies had to be paid out (or unpaid portion returned)

I'm of thoughts that the way reporting the subsidy is flawed, in reports of listed companies

The legislation provided that the wages paid from subsidy & subsidy were non taxable / non deductible

It's questionable whether wages paid up to subsidy level were even a company expense, perhaps
net off (with associated note of what was netted off) would have been more appropriate.

The true wage cost over subsidy period is in fact the amount in excess of any subsidy, which the entities
paid out & wore at the end of the day

Add on AC Levies, Kiwisaver, HP and all the extra Remuneration oncosts associated to arrive at figure
for Overall net outgoing when Covid times trading was negligible / stores were closed

but just MTCW ..


Merry Christmas to all and best wishes for the holiday season !

[JeremyALD]

I agree that the whole debate is overdone. There was obviously huge disruption from the lockdown and HLG were eligible to claim. At one point their SP dropped to $1.80! Thats how dire things were looking.

The fact they have recovered well should be celebrated, not shut down as a negative. Its almost like some people would prefer for all businesses to have not bounced back and struggled.

If they made a large profit during lockdown or during the wage subsidy that would be a different story, but a lot of these companies have performed well several months after the restrictions which keeps people in their jobs and our economy running.

Hallensteins has also performed well because they have spent several years focusing on e-commerce and have benefited from that tailwind, alongside good management.

Enjoy your Christmas everyone, excited for another big year ahead!

[BlackPeter]

The Vueve Clicquot champagne is going to go down so very much better,

knowing

that there are two-faced hypocrites out there, walking around with hijabs stuffed in their posteriors,

spoiling their festive season with wage subsidy in their minds.

Jeez - you have a serious problem ... and it's not just related to hijabs ...

I hope that this festive season gives you a chance to reflect and to work on this issue ...

It is so sad ... and your hate and spite devaluates many of your otherwise useful posts.

Let it go ... and enjoy the season. No matter what you believe (if anything) - but I hope the spirit of Christmas manages to touch you. It is the time of love and forgiving ... maybe you could even try to forgive the people who didn't do wrong :

Merry Christmas!

[Balance]

Jeez - you have a serious problem ... and it's not just related to hijabs ...

I hope that this festive season gives you a chance to reflect and to work on this issue ...

It is so sad ... and your hate and spite devaluates many of your otherwise useful posts.

Let it go ... and enjoy the season. No matter what you believe (if anything) - but I hope the spirit of Christmas manages to touch you. It is the time of love and forgiving ... maybe you could even try to forgive the people who didn't do wrong :

Merry Christmas!

You prefer wage subsidy up their posteriors?

Hijab because the wearing of it (after it was pointed out that it represents oppression, persecution and brutalization in countries like Iran) is the height of how cynical & hypocritical the government is.