Current Ratio: HY2024 Perspective
Quote:
Originally Posted by
Ferg
I saw this note in their HY report:
"The syndicated facilities fund the general activities of the Group, the seasonal fluctuations in working capital, and the Go livestock receivables."
So the facility funds both inventory and livestock receivables, although it doesn't explain the growth in the WC balance. Instead p22 of HY24 report pretty much explains it. It is not good reading.
If I were a shareholder I would want to know their receivables are actually collectible.
I guess you are looking at the $16.400m increase in 'Accounts Receivable' over the half year period? Let's put some context on that.
|
EOHY2024 |
EOHY2023 |
EOHY2022 |
EOHY2021 |
EOHY2020 |
PGG Wrightson Cash Balance {A} |
$13.307m |
$2.484m |
$1.113m |
$1.764m |
$0.682m |
Accounts Receivable Asset {B} |
$294.198m |
$321.851m |
$296.772m |
$234.765m |
$241.598m |
GoLivestock Animal Assets (C) |
$40.578m |
$42.470m |
$35.805m |
$30.582m |
$38.584m |
Total Current Assets {A}+{B}+{C}={D} |
$348.083m |
$366.805m |
$330.690m |
$267.111m |
$280.864m |
Accounts Payable Liabilities {E} |
($265.312m) |
($273.959m) |
($269.311m) |
($208.328m) |
($221.050m) |
Short Term Lease Liabilities {F} |
($20.189m) |
($18.863m) |
($17.690m) |
($16.936m) |
($N/Am) (1) |
Total Current Liabilities {E}+{F}={G} |
($286.131m) |
($292.822m) |
($287.001m) |
($225.264m) |
($221.050m) |
Total Net Current Assets {D}+{G} |
$61.952m |
$73.983m |
$43.689m |
$41.847m |
$59.814m |
Working Capital Limit |
$70m |
$70m |
$70m |
$70m |
$70m |
Term Facility Limit |
$90m |
$90m |
$60m |
$60m |
$50m |
Current Ratio {D}/{G} (2) |
1.22 |
1.25 |
1.15 |
1.19 |
1.27 |
Inventories |
$130.769m |
$129.717m |
$111.939m |
$105.536m |
$107.750m |
Average Days in Arrears, Accounts Receivable (3) |
100 |
103 |
101 |
91 |
103 |
Table Notes
1/ Not Applicable because short term lease liabilities as a balance sheet item did not exist prior to IFRS16 implementation.
2/ I guess a real accountant would see my above calculation table as a corruption. Generally it is common practice to include inventories amongst current assets. The idea being you can just put a sale sign up on the door and all these consumers will rush in converting your 'stock in store' into cash. But with a specialist retailer such as PGW, with their farmer customers on the 'bones of their bums' and the banks refusing them credit, I am not sure this is a realistic. So I have chosen to leave inventories out of the current assets total.
3/ Days in Arrears for Accounts Receivable Calculations
Any Period: (Accounts Receivable less GST)/(Average Daily 'Retail & Water' Revenue)
HY2024: ((1/1.15)x$294.198m)/($471.371m/184) = 100days
HY2023: ((1/1.15)x$321.851m)/($500.008m/184) = 103days
HY2022: ((1/1.15)x$296.772m)/($468.989m/184) = 101days
HY2021: ((1/1.15)x$234.765m)/($413.421m/184) = 91days
HY2020: ((1/1.15)x$241.598m)/($373.837m/184) = 103days
------------------------------------------
It looks like PGW were more diligent following up their overdue accounts in FY2024 rather than FY2023. The 'GoLivestock' assets will generally be cashed up before the winter, and probably at a higher price than book value (because they have had a few months of fattening up by the farmer).
The accounts receivable are big numbers to be sure. And those numbers do rise going into that half year balance date, because this period marks the seasonal time that most farmers are making their purchases. But looking at the multi-half-year picture, this doesn't look like a company with a cashflow crisis spiraling out of control. And we should also remember, just after the close off period, the banking syndicate increased the allowable working capital draw-down to $85m. So it doesn't look like the banks have a problem with this picture either (or at least they didn't at the half year balance date).
SNOOPY
HY2024: Divisional Profitability
HY2024 |
Retail & Water |
Agency |
Back Office Total |
Revenue |
$478.301m (85.4%) |
$81.589m (14.6%) |
EBITDA |
$39.962m |
$1.431m |
($4.775m) |
less Back Office EBITDA ReAllocation |
($4.078m) |
($0.697m) |
|
less Net Interest Allocation |
($2.019m) |
($1.035m) |
($1.666m) |
less Back Office Interest ReAllocation |
($1.423m) |
($0.243m) |
|
less Depreciation & Amortisation |
($8.214m) |
($4.771m) |
($1.537m) |
less Back OfficeDA Reallocation |
($1.299m) |
($0.238m) |
|
less Income Tax Benefit (Expense) |
($8.412m) |
$1.154m |
$2.469m |
add Back Office Tax ReAllocation |
$2.109m |
$0.360m |
|
equals NPAT |
$16.626m |
($4.039m) |
|
Net Profit Margin |
3.48% |
-4.95% |
|
Notes
1/ Reallocation apportioning is on the basis of divisional revenue.
SNOOPY
HY2023: Divisional Profitability
HY2023 |
Retail & Water |
Agency |
Back Office Total |
Revenue |
$500.008m (85.5%) |
$84.670m (14.5%) |
EBITDA |
$48.918m |
$3.643m |
($4.717m) |
less Back Office EBITDA ReAllocation |
($4.033m) |
($0.684m) |
|
less Net Interest Allocation |
($2.969m) |
($0.904m) |
($1.084m) |
less Back Office Interest ReAllocation |
($0.927m) |
($0.157m) |
|
less Depreciation & Amortisation |
($8.017m) |
($4.301m) |
($1.411m) |
less Back OfficeDA Reallocation |
($1.206m) |
($0.205m) |
|
less Income Tax Benefit (Expense) |
($10.781m) |
$0.374m |
$2.023m |
add Back Office Tax ReAllocation |
$1.730m |
$0.293m |
|
equals NPAT |
$22.715m |
($1.941m) |
|
Net Profit Margin |
4.54% |
-2.29% |
|
Notes
1/ Reallocation apportioning is on the basis of divisional revenue.
SNOOPY
FY2023: Divisional Profitability
HY2023 |
Retail & Water |
Agency |
Back Office Total |
Revenue |
$785.298m (80.6%) |
$188.803m (19.4%) |
EBITDA |
$54.129m |
$16.608m |
($9.003m) |
less Back Office EBITDA ReAllocation |
($7.256m) |
($1.747m) |
|
less Net Interest Allocation |
($3.779m) |
($3.857m) |
($1.937m) |
less Back Office Interest ReAllocation |
($1.561m) |
($0.376m) |
|
less Depreciation & Amortisation |
($16.067m) |
($8.787m) |
($3.009m) |
less Back OfficeDA Reallocation |
($2.425m) |
($0.584m) |
|
less Income Tax Benefit (Expense) |
($9.707m) |
($1.170m) |
$4.459m |
add Back Office Tax ReAllocation |
$3.594m |
$0.865m |
|
equals NPAT |
$16.928m |
$0.942m |
|
Net Profit Margin |
2.16% |
0.499% |
|
Notes
1/ Reallocation apportioning is on the basis of divisional revenue
SNOOPY
Stock Turnover Recalculation: HY2023, FY2023, HY2024
Quote:
Originally Posted by
Snoopy
I can take a linear average modelling guess at the average amount of store stock on hand during the year, by looking at three reference balance sheets: FY2022, HY2023 and FY2023.
Average Inventory = ($107.533m+$129.717m+$102.048m)/3 = $113.099m
The revenue for the year at 'Retail & Water' was $796.043m. That means the stock turn for FY2023 was: $796.043m/$113.099m= 7.0 times. That puts the $65m or working capital into context. It is only $65m/$796.043m or 8% of annual revenue. Still a lot of money of course. But nothing that a few judiciously priced end of season stock sales could not raise. Even the seasonal wind down of 'GoStock' might produce that kind of cash.
PGW is a seasonal business. So what is my estimate of stock turn over HY2023?
Average Inventory = ($129.717m+$102.048m)/2 = $115.883m
Revenue at 'Retail & Water' over HY2023 = $487.909m. => 6 Month Stock Turn = $487.909m/$115.883m= 4.2 times
Did the stock turn slow down over HY2024?
Average Inventory = ($130.769m+$107.533m)/2 = $119.151m
Revenue at 'Retail & Water' over HY2024 =$471.471m => 6 month Stock Turn = $471.471m/$119.151m = 4.0 times
So we did see a small drop off in stock turn over FY2024 as things got tighter. But not enough to suggest to me that 'enough cashflow could not have been rounded up' to temporarily repay the working capital debt of $65m.
Quote:
Originally Posted by
Ferg
Snoopy - if you are calculating stock turnover, it should be based on the cost of sales, not sales. But whatever floats your boat....
To calculate the 'cost of sales' from the 'sales revenue' you have to know the net profit margin. You won't find that figure in any PGW report. However, it is possible to work in out. And this is an exercise that I have now done (posts 5774, 5775 and 5776). So I can now redo these stock turnover calculations as per Ferg's suggestion.
Period Stock Turn = (Cost of Period Revenue)/(Snapshot of Inventory value)
Average Inventory FY2023 = ($107.533m+$129.717m+$102.048m)/3 = $113.099m
Cost of Retail and Water Revenue = (1/1.0216)x$796.043m = $779.212m
=>FY2023 Annual Stock Turn = $779.212m/$113.099m= 6.9 times
Average Inventory HY2023 = ($129.717m+$102.048m)/2 = $115.883m
Cost of Retail and Water Revenue = (1/1.0454)x$487.909m = $466.720m
=>HY2023 Stock Turn = $466.720m/$115.883m= 4.0 times (equivalent to 8.0 times annual rate)
Average Inventory HY2024 = ($130.769m+$107.533m)/2 = $119.151m
Cost of Retail and Water Revenue = (1/1.0348)x$471.471m = $455.616m
=>HY2024 Stock Turn = $455.616m/$119.151m= 3.8 times (equivalent to 7.6 times annual rate)
The result of the correction is a little bit of a drop in the stock turn rate. But the basic narrative remains unchanged. That being that stock turns over faster in the first half than the full year, and that the stock turnover rate over HY2024 is a little behind that over HY2023, although it is not alarmingly lower. That is pretty much what you would expect in a rural downturn. This is of course not what shareholders would like to see. But I don't see a sign of mismanagement here. To improve the stock turnover you would have to reduce inventory even more, which may not provide farmers with the choices that they need or want.
SNOOPY