Part 1: Net Profit - Income Tax Expense? Financial Reporting Shenanigans
With the half yearly results coming out this week for SLR and RED I thought I'd start a thread for us to discuss the comparitive results and the the facts.
SLR's reported Profit after tax for the half year of $49.7 million
Ok, pretty good. Significantly above RED's $29M. But then RED has a shocker of a hedge so if i used a like for like gold price that was achieved by SLR then their profit would be ~$66M.
HOWEVER!!! - SLR's profit figure includes an income tax expense of $23 million.
Hey what I thought SLR had large tax losses. Why are we paying income tax.
We are not. It is purely a non-cash movement on the deffered tax asset and liability accounts. SLR has in fact no income tax payable as it has significant accumulated tax losses as per Note 7 in the accounts. (see below)
The board/CEO have chosen to mislead shareholders by writing off the deferred tax benefit from the balance sheet and booking it as an expense to reduce the reported Net Profit after tax!
I wonder why?
Based on my interpretation of the audited financial reports the actual Profit After Tax is ~$73 million for the 6 months ended 31 December 2023.
This raises so many questions. What are RED's tax losses? This was mentioned as a major reason for why RED is taking SLR over and not the other way around.
It also obviously to me questions the comparative valuation that is currently RED 51.7 / SLR 48.3
Quoted from Page 23 of the audited half yearly Financial Statements
7. Income Tax
The Group recognised an income tax expense of $23,096,000 for the half year. Income tax expense relates to movement in temporary differences applied against the Group’s deferred tax balance, decreasing the net balance to a deferred tax liability position of $8,695,000 at 31 December 2023 (June 2023: Deferred tax asset balance $14,401,000). The Group utilised $67,051,000 of Australian carried forward tax losses in the period, which results in $218,139,000 of tax losses at 31 December 2023 (June 2023: $240,326,000) remaining in Australia for offset against future taxable profits.
The Company has not recognised $37,654,000 of these losses on the balance sheet which would equate to a deferred tax asset of $11,296,000. At 31 December 2023, the Group’s Canadian subsidiary has $244,506,000 (June 2023: $209,434,000) of tax losses remaining that are available for offset against future taxable profits in Canada. The Canadian subsidiary has not recognised $128,707,000 of these losses on the balance sheet which would equate to a deferred tax asset of $32,177,000.SENTIMENT: The RED/SLR deal stinks and the Board is not acting in shareholder interests so i should probably sell BUT they have driven the share price so low it's probably better to hold and agitate for change and at least have some fun.
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