Result 1, 2 or 3? What will it be?
Quote:
Originally Posted by
Snoopy
I have made the following assumptions in my FY2018 estimates:
1/ The net bank debt is unchanged from HY2018 (the latest balance sheet information published).
2/ My first estimate simply doubles the earnings from an already depressed half year result.
3/ For my second estimate (the horror scenario), I have reduced EBITDA down to a level so that the banking covenants are broken, without changing my net debt assumption.
P.S. Ross and the rest of the board wants the leverage ratio below 2
The 'Keenan preference' was made in passing by Simon Bennett in the AGM address. Time to put some numbers on what would cause the board concern:
Financial Year |
2018 (HY Annualised Estimate Scenario) |
2018 (Board Shock Scenario) |
2018 (Horror Scenario) |
EBITDA (Snoopy produced) {B} |
$12.046m |
$11.592m |
$7.728m |
Finance Cost {C} |
$1.659m |
$1.659m |
$1.659m |
Interest Coverage {B}/{C} |
7.3 |
6.8 |
4.7 |
Net Bank Debt {D} |
$23.183 |
$23.183m |
$23.183m |
Leverage ratio {D}/{B} |
1.9 |
2.0 |
3.0 |
AWF does not tend to emphasize the EBITDA figures when announcing their results. They speak in terms of NPAT. So what does an EBITDA of $11.592m imply in terms of NPAT?
Assuming the interest costs and Depreciation and Amortisation costs carry over from the half year to the full year:
NPAT = 0.72 x [ EBITDA - I -DA ]
= 0.72 x [ $11.592m - 2($0.741m) - 2($1.864m)] = $6.328m (FY2018 profit, not a great result)
However, a $3.418m profit has already been declared for the half year. So to produce an annual result like that, would require a second half profit (still down on the first half) of:
$6.328m - $3.418m = $2.964m
Boards hate cutting dividends. If the FY profit is there or thereabouts and the outlook is OK, I pick the dividend will be maintained. But if the FY profit is really below that reported last year (as opposed to below the result of counting Absolute IT in the fold for twelve months), we shareholders might get a dividend cut. I guess it all depends how good that cashflow is.
SNOOPY