Declared vs Normalised Profits for FY2018
Quote:
Originally Posted by
Snoopy
I am concerned that Contact is inappropriately manipulating their imputation credit balance to produce a superficial gross yield that is attractive to investors, but that is in reality not sustainable. Manipulation of imputation credits is an easy game to play. All a company must do is to pay tax in advance to a rate of 28%, regardless of how much tax is actually due, then the subsequent dividend can be paid out as 'fully imputed'.
The interesting thing to compare is the 'cumulative normalised profit' and the 'cumulative dividends' paid each year. During FY2018, for example, the 'cumulative normalised profit' fell short of the 'cumulative dividends' paid that year by:
28.0cps - 18.3cps = 9.7cps
Yet somehow the dividends paid during that financial year were 'fully imputed'. This could have been caused by one off factors (because tax is paid on actual profits not normalised profits). I will have to investigate. But to the set and forget shareholder, it does give the impression that 28cps of the dividend could be thought of as a yardstick to measure what level of dividend might be payable, fully imputed, into the future. I would argue that the real yardstick is only 18.3cps: a massive difference.
|
Declared Profit FY2018 |
Normalised Profit FY2018 |
EBITDAF |
$481m |
$481m |
less Depreciation & Amortisation |
($215m) |
($215m) |
less Net Interest |
($84m) |
($84m) |
equals Net Profit Before Tax |
$182m |
$182m |
less Actual Tax Paid |
($40m) |
|
less Tax @28% |
|
($51m) |
add Change in fair value of financial instruments |
$3m |
|
less Tax on Significant Items |
($1m) |
|
equals Net Profit After Tax {A} |
$144m |
$131m |
Shares on Issue EOFY {B} |
716m |
716m |
Earnings Per Share {A}/{B} |
20.1cps |
18.3cps |
It is interesting to see that neither scenarios' endings come anywhere near covering a 28cps fully imputed dividend. My conclusion is that there must have been a substantial prepaid tax balance prior to FY2018 to allow those dividends to be fully imputed. The 'fully imputed dividend' for FY2018 was nothing more than a charade.
SNOOPY