Although their appears to be a consensus view in the market place that
NLG's outlook is shaky, I believe that common sense should prevail
particularly in regards to its financiers. NLG is forecasted to make a
loss after tax of around $10.9m for the 2007/2008 financial year.
Although this may sound like a lot, when you actually exclude non-cash
items from the figure such as depreciation, amortization, provisions
and accruals it’s relatively immaterial when compared with NLG’s
forecasted sales.
So too if you take into account all of the fundamentals that have
negatively impacted upon NLG’s results such as; the smoking bans, its
somewhat short term unsustainable growth, its required capital
expenditure program, the current taxes on RTD’s and the wet weather,
the overall results are reasonably encouraging.
Also NLG has recently shored up its boards independence, appointed an
experienced company secretary - which has already improved it
disclosure compliance - and has recently had $22m injected into its
business from three cornerstone investors in order to reduce its debt
level. So too Arthur Laundy has recently retired from the board which
could be viewed as a sign of faith in the current management team.
If there is a question over NLG’s business model look no further than
the Laundy Hotel group to see if it’s workable or not. The long term
outlook for NLG is positive because of the following;
• An expected improvement in sales from a reversal of the initial
negative impact that smoking bans had on the business
• A continuation of NLG’s capital expenditure program
• The disposal of underperforming pub assets, with the proceeds used
to retire debt
• An increase in liquor sales throughout its network of bottle shops,
primarily from an improvement in online support, an increase in the
stores range, better merchandising techniques and improved purchasing
systems
• A continued improvement in consistency and quality across the board
in its food offer, and
• Purchasing scale by means of combining the back office buying
functions of NLG and the Laundy hotel group.
Although their appears to be a consensus view in the market...
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