Forum Archive Index - June 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

 

Peter,

 

My post of June 24 mentioned in item 3, that on the basis of RMG having declared an EBITDA of only $ 1.3 mill.in the first 3 months, that this could amount to $ 6 mill. for the full year.

 

I did'nt say that they will earn this! In my opinion, it is the best what can be expected!

 

But even so, if they allowed for a deduction of only half of the abnormals/intangibles that they ought to deduct and pay a nominal tax of 0.1 mill, their notional profit will only be 0.3 cents / share!

 

I say " notional ", because we have not allowed for the deduction of more goodwill!

 

In any case, there are a number of reasons why this target may not be reached:

 

The new CEO, mr Boult, will want to put new systems into place and do everything  needed to try to set up the company properly.

 

He has already mentioned the appointment of more senior staff and no doubt he will do what needs  to be done. Computer systems will be looked at very carefully! No doubt, he will be looking at any overlapping of branches and what can be done about this!

 

My opinion is, that either all of the costs will be entered this year or, if that is not acceptable or not possible, the reorganisation and associated costs will continue in the year following! As mentioned in previous posts, the money will be tight!

 

 I doubt if there will be any dividends in either this or the following year! 

 

He will be writing down more if he thinks that this is justified. This time, there won't be any long discussions with the auditor !

 

In my opinion, the Board may not be in a position to refuse anything, he thinks that needs to be done!

 

Thus, the sum total of the costs of reorganisation and the strict adherence to correct accounting, will most likely lead to a loss, even if:

 

No tax is paid and the entry of goodwill is a nominal one.

 

Therefore, your reference in your post of June 27, 2001 that " my equation of the odds of making profit this year are 33% ", is a somewhat optimistic one, I feel.

 

I have already mentioned that I am only interested in the NPAT data and this needs to include the appropiate amount of goodwill!

 

My posts of June 23 and 24, 2001, refers to the 582 mill. shares, RMG has. Of this amount, 264 mill. shares could be in escrow till June 30, 2002.

 

This lot is overhanging the market in the meantime! Then,  the next hurdle is having to pay tax. 

 

I shall wait with buying RMG till this situation is clarified. That will take time!

 

Those are my opinions!

 

Gerry