CAV - Cavalier Corp (Carpets)

[_Michael]

Call me naive if you will but could someone help me out please. When CAV start saying things like... "normalised is a non-GAAP" form of reporting... etc is that not a form of deflection. Ie are they trying to hide something here? Or is reporting normalised earning "common accepted practice"?

I know there were "restructuring" (we stuffed up and have to fix our mistake) costs, but to me if you report "normalised" you can almost always report a profit if you have a clever enough bookkeeper. For what its worth, if they can avoid future "restructuring" costs, then profits at a slightly higher rate (increase in turnover in NZ and wool prices) and a divvie of 6-8 cents may make $1.40 a good entry point.

You are right its bad practice and it is definitely a deflection as the "restructures" etc still cost shareholder money despite not being part of usual ongoing operations

Brian Gaynor highlighted the exact issue that you raise a while back in the article below

http://www.nzherald.co.nz/business/n...ectid=10749064

The worst offenders I personally find are FBU who every single year manage to pull out at least $100m in "one-off" costs

This is total BS becuase even if its a asset write down, they are writing own an asset that was paid for with your cash!!!

The other thing is FBU break out costs for opening/closing plants when its done so often you would argue its normal operations

[blackcap]

Thanks for the reply and the article Michael. Appreciated.

[winner69]

Doing it this way is to give you a reasonable picture of what is normal today and if we 'don't stuff up' again what can be expected in the future, or at least a better feel for next year anyway.

You meant to be forward looking .... so whats normal is important to see what the future holds ... so you can assess what the company is worth ...in normal times

The past is forgotten and forgiven ... just think future

A study a few years ago in the states (pre GFC) concluded that S&P500 companies wrote of 20% of profits were offset by write downs in the subsequent 5 years.

Michael - has the $300m plus writedown affexted the future of PGW?

[blackcap]

Hi Winner...

I can see where you are coming from and it does make sense as you put it. But my major fear is that this gives inept management a nice little get our of jail free card and this "tool" for use of better word is able to be manipulated and therefore provide distortions. Surely an analyst worth his/her salt can provide future normal earnings by digging through the abnormals?

[macduffy]

Any estimate of "future normal earnings" is only ever going to be an educated guess, whichever ways analysts juggle past years' abnormals.

To me, the encouraging bit was that the official GAAP NPAT number was +$3m, compared to the previous year's loss of -$1.6m. Oh, and the dividend.

[winner69]

Cavalier intrigues me.

.

You may have noticed CAV intrigues me as well .... or at least a morbid fascination for it

Zigzag ... wouldn't quite go as far a permanent turnaround story .... but possibilities of a cyclicaly if timed right .... but anything to do with these companies I have a morbid fascination with be prepared to be disappointed

[bulltrap]

A study a few years ago in the states (pre GFC) concluded that S&P500 companies wrote of 20% of profits were offset by write downs in the subsequent 5 years.

Michael - has the $300m plus writedown affexted the future of PGW?

My lesson from the PGW goodwill write-off was that if you're going to shrug off historical write-downs (as both company management and market appear to have done), you also have to plonk a big discount on anything that gets added to the balance sheet in the first place - that is, take any capitalized costs with a hefty serve of pink rock salt.

Shall we say a 50% discount for intangibles (e.g. goodwill) and 20% for tangibles, as a first approximation?

It was a shock to me as a casual investor that a company can pay too much for something and then treat their overspend as an 'asset'.

[macduffy]

The problem is that it is often only in hindsight that it becomes apparent that a company has paid too much for an acquisition - and that can take years to become obvious.

On the other hand, there are instances of the opposite - real bargains - eg Infratil and NZ Super's purchase of Shell's downstream assets.

[baller18]

Damn should've got in at $1.40! Argh missed my chance

[winner69]

Star performer today

If anybody wants a decent chunk they will need to go to 200 eh