No love for CSV, page-109

Hi Db85,

Equity increased by $43.8m due to the issue of an extra 34.7m shares during the year. Most of these funds went towards the acquisition of the Codeblue business in New Zealand.

The equity shows the amount of cold hard cash that has been invested in the company as well as retained earnings. This money has been spent building the company and unless there is a write down in assets such as intangibles/goodwill or a revaluation of hard assets such as buildings and land or earnings being retained, this figure will stay the same and is used more as a reference to what has been spent building the company than anything else. In this case yes the equity has increased but it has already been spent and can’t be used for the payment of dividends unless an asset, ie part of the company or a building for example, is sold.

Half the increase in inventory was due to an increase of printer toner in the field. (not saying that it’s a problem but Dick Smith had a very large quantity of ink cartridges, that belonged to printers no longer used, on its inventory – just something to keep in mind).

Not sure where you got the small increase in liabilities. From the ‘Total Liabilities’ on page 49, liabilities increased from 251.4m to 304.7m.

Net assets though did increased from 253.7m to 288.7m (35m) but intangibles, goodwill etc that is not a solid asset and is more often than not eventually written off over time, increased by almost the same amount.

Look, at the end of the day they may well end up with enough cash to pay out dividends at 9 cents a share but the way things look, it means that they will have a pay out ratio of close to 100% if not higher, so you are paying for a dividend and not so much for a company that is retaining profits for growth. For this reason as I stated in my last post I consider CSV to be currently priced at about fair value if the latest profit down grade is a one off but that’s the risk you take.