This is third in the series...and the shortest!!
Have already written this....
(The above article also has the link to the first one)
Jubilant Foodworks today declared the Q4 and Full Year results for FY13.
Since I have already discussed in detail a lot about the model in the previous write-ups, here I just wanted to kind of top it up with something new.
- The capital expenditure for the company in the last 3 years has been 70 cr, 120 cr and 185 cr for FY11, FY12 and FY13 respectively. (Numbers have been rounded off approx.) And now for FY14, 250 cr is the number being guided for.
As can be seen,the capex is just ballooning with each passing year.And since there is limit to the number of stores that can be opened in a year, increasing amounts is being spent on non-stores capex. This basically relates to money spent on commisaries/factories to supply to stores in a given region.
The total expenditure on these factories till date cumulatively would have been maybe 100 cr. This is a rough estimate.And these are supporting the 570 odd stores that the company operates.But now we are talking about spending a similar quantum of money in one year itself!! And this when the store opening in the year would be of the order of 125.Interesting!!
- The other interesting part of this ballooning capex story is the tax benefits it is generating for the company.Lets see how.
In FY13, company provided for deferred tax of about 13 cr. Assuming 30% tax rate,the additional depreciation that company would have claimed in the tax books is around 40 cr, which will be over and above the 55 cr already claimed in the accounting books. So company has claimed around 95 cr depreciation in the tax books when the capital expenditure in the year was around 185 cr.!!
For FY14 they have suggested a capex of 250 cr. And have also confirmed that there will another deferred tax entry similar to the one in FY13 and probably a bigger one.
When asked about the deferred tax, it was clarified that the tax books had "leasehold improvement" expenses being shown as revenue expenditure and thus claimed. Clearly the same were being capitalised in the accounting books.
That also means the profit claimed in the tax books is at least lower by that much i.e. around 40 cr.
So there is a double benefit.The profitability declared to investors is 'inflated' to that extent and tax outflow is lower to the extent of deferred tax claimed in the books!!
In other observations, the Same stores sales growth being guided is lower at around 10%, which is on expected lines given the sluggish economy.
Hope you found the observations interesting enough!!
(Standard Disclaimer : The probability of my opinions going horribly wrong are closer to one than to zero!!)
1 comment:
Thanks for the insights.
I guess the increased capex is due to Dunkin Donuts which is a slightly upper end format.It is a new line of business with uncertain revenues because we dont know whether ppl will eat a lot of donuts
Second, a long shot but given how nasty IT ppl can be, they can reopen files and make Domino's capitalise expenses, increase taxable profits and slap penalty
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