Park & Park plc Analyst Conference Call
As Park & Park plc is on the verge of a large corporate acquisition, the Board of Directors thought it prudent to brief the Wall Street and London City analysts, as well as corporate shareholders. To be succinct, we will discuss only the potential effects of the acquisition on the income statement, balance sheet and cash flow statement. The sleep bank account, nappy inventory turn ratio and outsourced service provider relationships will be dealt with in the future.
The income statement won’t be materially affected in the near term. Revenue should remain constant. Costs, in aggregate, should change only marginally. The specific cost line items though will change dramatically. High value travel and entertainment expenses will be significantly curtailed, while daily operating expenses will increase. The Finance Director expects these changes to balance each other. Therefore, net operating income should remain stable or slightly below trend in the near-term.
The balance sheet at this time is not highly leveraged or geared. Also, we anticipate that long-term debt will be kept to a minimum, as the acquired asset is managed through cash flow. With an acquisition of this type, we are expanding the fixed assets in the medium term, fully anticipating the potential efficiency gains in the future. We expect the increased operating productivity to come online in 12-14 years.
The cash flow statement will also see change. Funds will be spent on purely operational projects in the short-term, with little regard for medium-term ROI. Interest payments on existing debt shall continue as expected. No capital expenditures are planned for the near future.
Taking into account all the relevant factors, we anticipate that the current dividend level will need to be re-evaluated, and the current Price to Earnings Ratio will re-adjust to the lower end of it’s recent range. Frankly, Park & Park has moved from a sexy growth stock outlook to pure long-term value play.
Colt Brothers stockbrokers has rated Park & Park an ACCUMULATE.
The income statement won’t be materially affected in the near term. Revenue should remain constant. Costs, in aggregate, should change only marginally. The specific cost line items though will change dramatically. High value travel and entertainment expenses will be significantly curtailed, while daily operating expenses will increase. The Finance Director expects these changes to balance each other. Therefore, net operating income should remain stable or slightly below trend in the near-term.
The balance sheet at this time is not highly leveraged or geared. Also, we anticipate that long-term debt will be kept to a minimum, as the acquired asset is managed through cash flow. With an acquisition of this type, we are expanding the fixed assets in the medium term, fully anticipating the potential efficiency gains in the future. We expect the increased operating productivity to come online in 12-14 years.
The cash flow statement will also see change. Funds will be spent on purely operational projects in the short-term, with little regard for medium-term ROI. Interest payments on existing debt shall continue as expected. No capital expenditures are planned for the near future.
Taking into account all the relevant factors, we anticipate that the current dividend level will need to be re-evaluated, and the current Price to Earnings Ratio will re-adjust to the lower end of it’s recent range. Frankly, Park & Park has moved from a sexy growth stock outlook to pure long-term value play.
Colt Brothers stockbrokers has rated Park & Park an ACCUMULATE.
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