|
FY2019 (iter. 1) (indicative forecast for FY2020) |
FY2020 (as reported) |
Cash On Hand |
($1.160m) |
($16.868m) |
Short Term Bank Loans |
$3.920m |
$40.000m |
add Long Term Bank Loans |
$31.742m |
$20.000m |
add Net Defined Benefit Liability (Pension Plan deficit) |
$5.883m |
$9.838m |
add Employee Entitlements |
$16.821m |
$13.960m |
Total Bank and Worriesome Liabiliities {A} |
$57.206m |
$66.930m |
NPAT + Impairment & Fair Value adj. {B} |
$7.187m (i) |
$7.940m (i) |
Minimum Debt Repayment Time {A}/{B} (in years) |
7.96 |
8.43 |
Notes
Iteration i (Assuming Profits from Seed Sales paid through to Shareholders)
(i) Calculation of NPAT adjusting for 'Impairment & Fair Value' chnages (representing available cashflow for each year) is as follows:
FY2019: $4.000m+$3.187m = $7.187m
FY2020: $7.133m+$0.807m = $7.940m
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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
In terms of the ability to repay all debt, I would argue PGW is in its worst position since the GFC when it was bailed out by Alan Lai and Agria. Banks are being told to look upon their loans to business more kindly, so who knows how the bankers are reacting to PGW's position. But I can't see any adjective more suitable for describing PGW's debt position as 'high'.
To some extent this end of financial year debt position is artificially favourable, because it comes off a relatively buoyant first half, before the drought hammered the second half year into a loss. The long term weather outlook is more dry weather in the east of the country over the coming summer. That means up until December 2020, we might be looking with a calendar year with no net positive income for PGW.
In the 23rd July 2019 released document "Notice of Special Meeting and Explanatory Notes" outlining the proposed capital structure following the capital repayment, the forecast core debt level was to be between $25m and $50m (page 9). Taking the cash position in to account, that means we now have debt headroom of just:
$50m - ($40m + $20m - $16.868m) = $6.868m
This is not much.
I would be fairly confident in predicting that as well as no final dividend for FY2020, there will be no interim dividend for FY2021 either. In my November 2019 review I said
"This is not a bond substitute."
No dividend for at least a year is a manifestation of that comment.