Thanks for the explanation W69. It makes more sense now.
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Hey Cookie, if you recast the WHS Cash Flow statement to reflect how cash came and went it looks like this …..last years divies paid by selling a building it seems
Whatever worst thing is that on a day to day basis WHS didn’t generate any free cash flow (negative $3m)
Anyway look at this …excuse the formatting
Reported Operating Cash Flow $214m
Less lease/Rent payments. -$101m
Adjusted Operating Cash Flow $113m
Less Capex. -$116m
Gives Free Cash Flow $-$3m
Less Dividends paid. -$35m
Total Cash consumed. -$38m
Funded by sale of property $31m and $10m debt (with a little extra in petty cash tin)
that's exactly the case.
one of the things I found amusing was the continuation of 'restructuring costs' and being excluded from management's adjusted NPAT.
Dating back to 2017 (over 7 years, the longest I have looked back), WHS has booked restructuring costs and excluded it from earnings every year bar one. For a grand total of $107.7m, an average of 15.4m pa.
Nice breakdown W69. So the divie wasn't generated from cashflow.
The capex is concerning and if I am not mistaken I think it's primarily related to their ecosystem strategy.
A few months ago I had a look at Amazon how they operated in the early days. To try and see what to look for, hints for the making of a great company.
Obviously they had exponential revenue growth, but at the at the same time they were getting hammered with their capex.
Stepping back I realised that Amazon's capex was all about building the infrastructure/ ecosystem or future moat that drove further growth. It became like this positive reinforcing cycle.
But back to the Warehouse. As a consumer what benefit do I get if I visit their website directly. The easy alternative is to google search. I just don't see a case for it, therefore I don't believe in their overall strategy.
I think it would be a different story if there was a high probability they would capture a huge loyal fan base. I just don't think that is the case.
A potential problem is that if they struggle to generate future cashflow. If they do, then they made need to sell one of the brands within the group which would put a dent in their overall strategy.
I recognise retail is a tough business especially in this environment. Perhaps their is pressure to innovate.
Cookie …..a hint about F24 cash flows and dividend in them saying limiting capex to $80m v $116m this year
Obviously hoping to have enough cash for a divie without borrowing much more or selling buildings
Just to bring a customer perspective for the market.
Actually, I don't really remember how I became a member (might have been through my Vodafone contract), but anyway, it didn't cost me money.
I get free delivery for any order over $50 from NZ and most from overseas ... So, this might be e.g. 2 packs of wheetbix, some moisturizer for the lady, a shirt from India and a spare for a gardentool. No need to buy it all from one supplier within the market. You would not get this with any other order from the Internet.
The other advantage is - I can order from overseas sites, the market does all the checking for me (does the order arrive in time and stuff like that) and if there are any issues I don't need to negotiate with somebody in China or India or in Australia or in the UK, but I can talk to somebody in NZ, and NZ consumer law applies.
Again - I can see as well, that the market so far does not seem to make money, but it clearly does have benefits for customers you won't get anywhere else.
Appreciate the comment BP. It gives me a better understanding on how they operate.
It kind of feels similar to Amazon- product dependent of course. I am curious how they make or will make money.
For all the investment they have made, I do wonder if it was money well spent.
It will be interesting to see if the capex tapers off W69.
I just wonder if was the right strategy from the outset, therefore what is the opportunity cost. Should have they returned excess funds to shareholders through divies or share buybacks.
Retail has certainly morphed since Tindall started the Warehouse.
jb hifi say today in AUS they rolling out heaps more store's in NZ and upgrading the NZ website. more competition for noel leaming