MDRT for FY2020f (forecast)
Quote:
Originally Posted by
Snoopy
It looks to me as though management have tried to get as many cobwebs out of the drawers as possible, like the 'Shock Capital Loss Cumulation', where all these sins could be covered by the mega profit of selling the seeds division: The idea being to 'wipe the slate clean' for a simplified FY2020. And because of the huge profit from the sale of the seeds division that subsumed any 'wipe the slate clean' losses, PGW should have set themselves up well for future years.
Time to look forwards to the current year to see if there is any ongoing substance to this 'debt issue'. The first step is to forecast a 'net profit after tax' assuming that the EBITDA figure of $30m for FY2020 becomes reality.
|
PGG Wrightson Rural Rump FY2020f |
EBITDA |
$30.000m |
less DA |
$9.632m |
less I |
$3.826m |
equals EBT |
$16.542m |
x 0.72 equals NPAT {A} |
$11.910m |
No. shares on issue {B} |
75.484m |
eps {A}/{B} |
15.7c |
We have no clear idea of what the bank loan position, balance of money owing to employees or deficit of the pension plan will be on 30th June 2020. So I am using the indicative figures for PGW today after the capital return as estimates.
|
FY2019 (iter. 1) |
FY2020f |
Short Term Bank Loans |
$3.920m |
$3.920m |
add Long Term Bank Loans |
$31.742m |
$31.742m |
add Net Defined Benefit Liability (Pension Plan deficit) |
$5.883m |
$5.883m |
add Employee Entitlements |
$16.821m |
$16.821m |
Total Bank and Worriesome Liabiliities {A} |
$58.366m |
$58.366m |
NPAT + Impairment & Fair Value adj. {B} |
$7.187m (i) |
$11.910m |
Minimum Debt Repayment Time {A}/{B} (in years) |
8.12 |
4.90 |
Notes
Iteration i (Assuming Profits from Seed Sales paid through to Shareholders)
(i) Calculation of NPAT and 'Impairment & Fair Value Adjustments' (representing available cashflow for FY2019) is as follows:
FY2019: $4.000m+$3.187m = $7.187m
------
My rule of thumb for the MDRT answer in years is:
years < 2: Company has low debt
2< years <5: Company has medium debt
5< years <10: Company has high debt
years >10: Company debt is cause for concern
So a figure of 4.9 is not a bad result, but neither is it good. It is better than the recent peak figure of the pre-split PGW from FY2018 (7.87), but worse than the four preceding years before that FY2017 (3.97), FY2016 (4.54), FY2015 (4.85) and FY2014 (3.28). I would describe PGWs current position as being 'one shock away from trouble'. Yes the potential gross dividend yield today may look attractive:
15.5c / ($2.46 x 0.72) = 8.8%
(Note: a 15.5c annual dividend represents a projected dividend payout ratio of 99%)
But this is not a bond substitute.
I would advise investors not to 'bet the farm' on PGW. But as part of a balanced income portfolio, where as an investor you are aware of what a farming downturn might do to this investment, I think a shareholding in PGW has its place.
SNOOPY
discl: shareholder
Senior Debt Coverage Ratio (SDCR): FY2020f
Quote:
Originally Posted by
Snoopy
Unaudited liabilities for the PGGW group as at 31st December 2009, after the proceeds of the Agria placement and subsequent rights issue was $993.8m. "Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
Senior Debt is bank Debt (held with ANZ National, BNZ and Westpac)=$197.9m+$75m(Working Capital)=$272.9m. Junior Debt is a $25m facility with South Canterbury Finance. Each year for >30days the Working Capital facility must reduce to zero.
SDCR<4.0 by 30-06-2010, SDCR<3.5 by 30-09-2010, SDCR< 3.00 by 31-12-2010 onwards.
Ten years on, how are we looking for FY2020? Using my 'forecast data' from post 4701
Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
=( $3.920m + $31.742m ) / $30m = 1.18 < 3.00 (good)
That is the balance date figure. Things don't look quite so good with $70m of seasonal bank finance thrown in:
Senior Debt Coverage Ratio" (SDCR) ="Senior Debt"/EBITDA
=( $3.920m + $31.742m + $70m ) / $30m = 3.52 > 3.00 (bad)
This suggests to me that on current EBITDA forecasts, PGW is now 'geared to the max'. But perhaps banks are OK with seasonal breaches of their covenants?
SNOOPY
Fixed Cost Coverage Ratio (FCCR): FY2020f
Quote:
Originally Posted by
Snoopy
This info is taken from the 'simplified disclosure prospectus' on made for the 2009 rights issue, page 45, additional numbers from p66 and page 68. There is an additional banking covenant called the "Fixed Cost Coverage Ratio" (FCCR).
FCCR>1.85 by 30-06-2010, FCCR>2.0 by 30-09-2010, FCCR>2.0 by 31-12-2010 onwards.
FCCR= [EBITDA+Lease Expenses] / [Total Interest(less interest income in cash)+Lease Expenses]
=[$18m+$29.8m]/[$37.34+$29.8m]= 0.71 (if EBITDA= $18m)
=[$45m+$29.8m]/[$37.34+$29.8m]= 1.11 (if EBITDA= $45m)
I havn't quite figured out why lease expenses are in there (can anyone help here?). But it does look like PGW are in trouble by this measuring stick as well.
Another ten years on update
FCCR= [EBITDA+Lease Expenses] / [Total Interest(less interest income in cash)+Lease Expenses]
= [$30m + $21.904m] / [$3.826m + $21.904m] = 2.0 > 2.0
The fixed cost coverage ratio just passes but with nothing to spare. More evidence that PGW is 'mortgaged to the max'
SNOOPY