Depreciation =$12.0m + Amortization =$1.1m - CAPEX $15.4m = -$2.3m
Tax effect (x0.3) that is $0.7m
FY2010 Net Profit $19.7m
RBD Owner earnings for FY2010 $19.7m-$2.3m+$0.7m= $18.1m. What am I missing?
SNOOPY
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1/ Around $18m of secured bank loans could be paid off, which might enable them to negotiate better banking terms.
2/ Creditors are up $3m year on year. RBD could pay their bills more promptly and negotiate better supplier rates as a trade off for doing so.
3/ Shareholder expectation will be for dividends of 16cps this year or $15.6m.
That pretty much takes care of the cash I think.
SNOOPY
As i said on the SKL thread where all this started often better to use Owners earnings and Free Cash Flow as the same
FCF is operating cash flow lwss capex ... and easier to calculate than going through the balance sheet and P&L and picks up changes in working capital and all that
Here are my values.
E = 19.5
D+A=13
Changes to working capital = 23.6
C ex.= 13.8
19.5+13+23.6-13.8=42.3
Of course it is only one year, but look at the cash yield.
42.3/197=21.5%=bargain
I am guessing but it looks like you use working capital as current assets less current liabilities?
If so you have included an amount of $17,9 for 'loans and finance leases' which shows as current in 2010 but was part of the $34m in non current liabilities in 2009 .... as such not really a change in working capital
Adjust for that and we will sort have have the same figure ..... and I didn't even use the E in my calcs
Can you explain what it says in note 24?
The increase in working capital comes largely from not paying your bills to the extent of $3.123m, and not paying tax on increased profit you have already earned of $2.938m , because the law allows it. Are you not deluding yourself about the nature of the working capital improvements? Creditors will eventually have to be paid and so will that tax bill. How does including the fact that these bills are not yet paid in the companies cash position show that RBD management are better at running their business? Is not paying your bills and not paying your tax a viable long term growth strategy?
SNOOPY
Using Free cash Flow or h2so4's formula could be seen as a lazy way to calculate 'owners earnings' because it doesn't address the points you raise.
If you improve your working capital position you have generated cash - thats good eh. Even better is business's like RBD can use creditors money as a source of capital (unlike SKL)
To overcome the problems like increases in unpaid tax as at balance date a more convential figure to use is trade working capital - ie inventory + trade debtors + trade creditors. This leaves out things like employee provisions and tax which are amounts where the liability has been incurred but not paid.
Over the course of time these things generally all balance out anyway and don't really impact upon the 'intrinsic value' of the company anyway
Deferred tax expenses are a non current asset not working capital.
The owner earnings calculation does not reconcile deferred taxes as it recognises that they will eventually have to be paid.
However free cash flow adds in deferred taxes (shown in the statement of cash flow) as though the company never has to pay it.
Got it...well I think have?
Debt repayment is after owner earnings and should not be added to cash.
New owner earnings 2010 =24.5m
The unpaid payments to suppliers and future tax bill are both payables from where I sit. I still fail to see how not paying your bills improves the long term ability of a business like RBD to generate cashflow. I also fail to see how paying the bills enhances the RBD business in a long term way. To me the issue is irrelevant. The vicissitudes in timing of paying your bills shouldn't affect the long term ability of the underlying RBD business model to generate cash.
And yes I did subtract them to get a truer picture, as a truer picture is exactly what I am after.
SNOOPY
You might make the argument that when a business is growing the tax bill always lags behind the increasing profitability. Thinking like that, it would be legitimate to consider the increase in resulting working capital because of deferred tax payments as an extra asset that the company can use. The problem with that appraoch is that it requires the company to keep growing in profitability in one direction with no reversals. This does seem unlikely if you consider RBD from where I sit.
SNOOPY
That is exactly my point Sulphur sugar daddy. Supplier expenses and tax bills have already been incurred because of normal business operations. How can you justify counting the resulting cash required to pay these bills on the balance sheet as extra 'owner earnings', when the simple act of paying these bills would immediately wipe out this extra cash?
A significant change between FY2009 and FY2010 is that an extra $3.123m of supplier bills have been withheld over and above all the bills held for payment at the end of the previous year. Yet you are telling us this is extra cash 'owner earned' by the company? I reiterate my point that simply not paying your bills may work for one year, but is not a long term cash generating strategy.
SNOOPY