PGW - PGG Wrightson

[noodles]

Spec div - see above.

Operating EBITDA - that is the approach I tried to use.

Took the company's figure for operating EBITDA, which excludes excluding associates' earnings, non-operating items and fair value adjustments.

Then took off interest and tax.

As it happens - it give a figure ('EBDA-ASS' above) which coincidentally is the same as the reported NPAT.

Does that method look right to you - any income in there that shouldn't be?

You have picked one of the more complex annual reports to decipher. This is my calc for underlying earnings

Operating EBITDA	58747
Equity accounted earnings of associates	2521
DA	-11242
Abnornal depreciation of IT system	3500
EBIT	53526
Interest	-7926
NPBT	45600
TAX @28%	12768
NPAT	32832
eps	0.043

Further, I expect PGW is provide dividends that are approx 100% of earnings.

Remember earnings do not equal cashflow. Operating Cashflow - capex allows the payment of dividends. Sometime increasing debt can be used as well.

[bunter]

You have picked one of the more complex annual reports to decipher.

It does look complicated. Maybe your figures are a 'normalised NPAT'.

Remember earnings do not equal cashflow. Operating Cashflow - capex allows the payment of dividends. Sometime increasing debt can be used as well.

Hadn't forgotten. Operating cashflow was what I tried to work out - being operating ebitda less interest and tax. Just wanted to be sure this figure was not less than the reported NPAT. Didn't look at CAPEX.

In fact it is almost the same - $42.3m.

If 2015 is 10% better than 2014, PGW will have about 46.5m available for divs.

[Snoopy]

I excluded the 1c special dividend from the 2014 dividend figures.
From NZX...

22/08/2014	Final	3.500c	0.618c	1.361c	03/10/2014	NZD
10/03/2014	Interim	2.000c	0.353c	0.778c	02/04/2014	NZD

I used 2.5c + IC for the final div.

Excluding the special div it paid 80% of NPAT out (don't know about 'normalised').
I think it is reasonable to use 80% payout for 2015.

BTW by my calcs, including the special dividend, PGW didn't pay more than it earned in 2014 - it paid 98% of total earnings.

Fair enough Bunter. Like noodles, I am a shareholder, so I will be much better off if your calculations and estimates are correct.

Unlike noodles I would also take off $1.388m in revenue from 'changes in fair value', mainly livestock valuations of animals in stock. That should reduce 'normalised NPAT' further by:

(1-0.28) x -$1.388m = -$1.000m

Not sure what noodles means when he adds back $3.5m for 'abnormal depreciation of an IT system'. I thought that software was amortised as an intangible under goodwill, not depreciated. Hopefully noodles will explain where that $3.5m he added back comes from because I can't find it in either note 25 or 26.

I think I would also add back the foreign exchange loss of $1,664m (not subject to income tax?) declared in note 12

SNOOPY

[noodles]

Fair enough Bunter. Like noodles, I am a shareholder, so I will be much better off if your calculations and estimates are correct. Unlike noodles I would also take off $1.388m in revenue from 'changes in fair value', mainly livestock valuations of animals in stock. That should reduce 'normalised profit' further by:

(1-0.28) x $1.388m = $1.000m

My normalised profit does not include:
-Fair value adjustments
-Non operating items

[Snoopy]

My normalised profit does not include:
-Fair value adjustments
-Non operating items

Quite right. I should learn not to try to look up things late at night and get myself into trouble!

Your normalised profit does include $2.204m net profit after tax from 4 Seasons Feeds Limited though (note 9). That's been sold. So I don't think Bunter should use that $2.204m as part of his base earnings case for PGW for FY2015.

SNOOPY

[bunter]

Your normalised profit does include $2.204m net profit after tax from 4 Seasons Feeds Limited though (note 9). That's been sold. So I don't think Bunter should use that $2.204m as part of his base earnings case for PGW for FY2015.

SNOOPY

I agree and in fact I didn't include any of the items in note 9 in my calcs.

Nor did PGW in its 'operating EBITDA' figure.
Equity accounted earnings aren't cash - the only cash is dividends from the companies.

I was happy to rely on PGW's 'operating EBITDAF figure - then take the cash items off - interest and tax.

Then believe them when they said 2015 is looking better.

Guess we'll find out soon.

This rain won't be hurting.

[noodles]

Quite right. I should learn not to try to look up things late at night and get myself into trouble!

Your normalised profit does include $2.204m net profit after tax from 4 Seasons Feeds Limited though (note 9). That's been sold. So I don't think Bunter should use that $2.204m as part of his base earnings case for PGW for FY2015.

SNOOPY

Quite Right. I should read the fine print.
How about this for underlying earnings

Operating EBITDA	58,747
DA	-11,242
Abnornal depreciation of IT system	3,500
EBIT	51,005
Interest	-7,926
NPBT	43,079
TAX @28%	12,062
NPAT	31,017
Equity accounted earnings (excluding 4 Seasons Feeds Limited)	497
TOTAL NPAT	31,514
eps	0.041

[Snoopy]

Guess we'll find out soon.

This rain won't be hurting.

My fear is that PGW will declare a record half year profit due to farmers selling off their capital livestock. That won't make for a pretty second half.

SNOOPY

[Snoopy]

Abnormal depreciation of IT system

3,500

Noodles, I have been through the 2014 annual report. I saw a comment about replacing the point of sale IT systems. But I didn't find anything about an abnormal charge of $3.5m. Can you point me where that figure came from please?

TIA

SNOOPY

[Snoopy]

PGW Market Cap:

Market Cap:	313.26M

PGW market capitalization is now $369.876m (share price 49c).

That is greater than the following current NZX50 listed shares, as of today:

ATM: $310.231m
STU: $255.662m
SKL: $266.072m
PEB: $245.334m
KMD: $286.108m
NZO: $273.714m

Time for a recall? Or will the 50% of tightly held shares held by Agria preclude a return to the NZX50?

SNOOPY