Ann: Appendix 4D December 31 2017, page-4

"I don't like to question your figures, as fundamental analysis is certainly not my strong point."

Question away at all times; it's how I learn (especially when I get things wrong).


"However, is the free cash flow number in brackets of 3.7mil for the half , correct ??
as with the second half being the stronger half, they would be on track to post a massive full year number I expect....... or is that your forecast for the year ??"

Yes, that $3.7m FCF number is just for the half ending DH2017.

Here's it's derivation:

Cash From Operating Activities = $5.719m

Less:
Payments for Property, Plant and Equipment = $0.727m
Payments for Intangibles = $1.407m
Proceeds from disposal of PP&E = $0.043m

=> Free Cash Flow for 6 months to 31 Dec, 2017 = $3.628m

(That's not quite $3.7m, but I suspect there were some rounding errors in my earlier post.)


For context, here is the historical seasonality in DH vs JH Operating Cash Flows, along with my forecast for JH2018 Operating Cash Flows (for what its worth):


DH2011: $2.6m
JH2012: $3.9m

DH2012: $0.2m
JH2013: $5.4m

DH2013: $2.6m
JH2014: $5.1m

DH2014: $2.0m
JH2015: $5.3m

DH2015: $1.1m
JH2016: $7.7m

DH2016: $1.6m
JH2017: $7.8m

DH2017: $5.7m
JH2018: $4.5m to $5.5m (Forecast)

Clearly OCF in DH2017 was a monster result compared to previous December halves. [*]

As you can also see, while OCF in the current half will still be "strong", especially compared to previous December halves, it will not be proportionally higher than DH2017.

In other words: whereas historically, June half Operating Cash Flows have been a multiple of December half Operating Cash Flows, it is practically not possible for that relationship to be repeated in the current financial year.

I suspect that from FY2019 the historical JH vs DH relationship will resume.

I think it warrants mentioning - in the context of potential for accelerated capital returns - that the company's net cash position is likely to exceed $5.0m.

[*] The reason for it was a $5m inventory reduction on pcp, a large part of related to de-stocking of amalgam stock across the supply chain, in line with declining amalgam sales.