Ann: Half Yearly Report and Accounts, page-6

"The wording at the end 'that relates to an ex-UK franchisee' makes me think the legals are related to this issue
Agree it's a great result if that is the case"

Initially, I though it a great result, either way.

But I suspect you are right; if one normalises for the settlement payment, then one should normalise for the offsetting legal expense.

Which makes it a simply crazy great result.

It is a quite fascinating case study in corporate evolution how this company trundled along for many years without any traction and then, suddenly, one day they found business model religion, after which the earnings have taken off:




KME's recent EBITDA history is tracking as follows:

FY2011: $0
FY2012: $0.8m
FY2013: $1.2m
FY2014: $1.6m
FY2015: $2.0m
FY2016: $2.4m
FY2017: $2.6m
FY2018: $3.8m


Without the making of too many hairy-chested assumptions, KME's FY2019 EBITDA could easily reach the $5m mark (1H was $2.3m, and June halves have typically been seasonally stronger); and FY2020's EBITDA could easily pass $5.5m

Even if the dividend payout ratio was lifted to 70%, the surplus cash flow generated over the next 18 months would still see the net cash position at around $6m or $7m by end of FY2020.

At the current share price, that would result in a prospective Enterprise Value of $35m, i.e. a little over 6x prospective FY2020 EBITDA.

Which, despite the near-trebling of the share price over the past 18 months, is still not at all a demanding valuation for a business that is growing its net earnings at a clip close to 20% pa.

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