Forum Archive Index - September 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi winner69,
 
>
>Snoopy - the RBD property sales realised $50M (not the $10.9million
>you mentioned)
>

Glad to see someone picked up the deliberate mistake!  ;-)

Yes you are correct.   The $10.9m that I mentioned was only the profit 
(amount above book value) on those property sales.  I see the actual 
proceeds form the sales totalled $52.1million.

I'll need to rework my figures on the effect of those property sales on 
RBD profitability now.  I was a bit sloppy the first time around anyway, 
so this will give me the opportunity to correct things.

$52.1m worth of property, now rented,  on an 11% yield means a rent 
bill of $5.73million that wasn't there before.  Assuming borrowings are 
being paid for at a 7% rate, and that $52.1million from property sales 
has gone straight back top paying off debt, then loan interest saved as 
a result of the sales will be $3.65m.  The net effect is a $5.73m-
$3.65m= $2.08m annual rent bill to pay.  Spread out over 94.8 million 
shares means gross profit is reduced by 2.2c per share as a direct 
result of this transaction.  The NPAT effect is that the profit is reduced 
by 0.66x2.2c= 1.4c per share.

> 
> If used to pay down debt current debt would be very low - so the
> current debt of $30M odd is a lot higher than it could be. So what was
> the extra debt raised for?.
> 

According to my 2002 annual report, RBD group debt reduced from 
$105.4m to $58.8m (in the year in which the property sales occurred) 
and later down to $58.0m in FY2003.  I don't see a lot of 'extra debt' in 
those figures.  The fact that RBD now has a lot less debt on the books 
should protect earnings against the effect of modest interest rate rises, 
when that happens.

>
> Look at the cumulative cash flows over the last 5 years or so. Look at
> operating cash flows plus property sales less investments plus/minus
> changes in borrowings and make your own mind up where the dividends
> have come from
> 
> Many different interpretations but two are property sales or
> borrowings
>

If that were the case, how do you explain the fact that all dividends 
have been imputed?   You can only pay imputed dividends if you make 
real profits by selling stuff  paying the tax as you go.  I grant you the 
amount received form the property sales probably does closely match 
the dividends paid by RBD since its float.   But by my way of looking at 
things, that is a co-incidence.

> 
>That same overview will also confirm what you have worked out - the
>dividend is probably safe unless they take on another concept or 
make
>another acquisition.
> 

I don't think they will do anything like that until a new CEO comes on 
board.

>
>Also have you noted that the DRIP scheme keeps a fair bit of cash in
>the company.
> 

I haven't highlighed that fact in any of my recent posts, but yes good 
point.

I see the number of shares has increased over FY2003 from 
93,086,674 to 94,815,164.  That makes 1,728,490 new shares that 
have been issued.  Options exercised during the year amount to 
437,020.    This implies

1,728,490-437,020= 1,291,470 shares issued under the DRIP.  Total 
dividend payble at 10c per share was $9,482,000m.  Dividend payment 
is split along the lines (45% interim)/(55% final) allotted at prices 
$1.593/$1.372 respectively.  This means that the number of shares 
allotted annually under the DRIP plan will *not* be split 45:55 in  
proportion to the dividend payout, but 38:62.

Now 38% or 1,290,470 shares is 490,379 shares.  At a price of $1.593 
that equates to $781,173 of dividend payout 'saved'.
62% of 1,290,470 shares is 800,092 shares.  At a price of $1.372, that 
equates to $1,097,726 of dividend payout 'saved'.

This means the actual cash paid out as a result of the dividend was:
$9.482m- ($0.781m+$1.097m)= $7.604m.  That equates to a cash flow 
basis dividend 8c per share  (a saving of 2c per share on the actual 
dividend declared).     By any measure, I don't think you can say RBD 
is short of cash.

SNOOPY




 

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