"If the net operating cashflow equates roughly to a trading EBIT of $0 (you might well have a more accurate reckoning of this than I), management will not be easily finding the roughly $38.5m in 18 months based on recent form."
MM,
With respect, the flaw in your analysis lies in the assumption that EBIT - which is indeed close to zero for BOL currently - should somehow approximate equal Net Operating Cash Flow
Why should that be?
The two are completely different things: EBIT is derived after the deduction of a (highly material) non-cash charge called depreciation. Net Operating Cash Flow is exactly that - hard cash flow, absent any non-cash adjustments (by definition).
[And besides, unlike EBIT, Net Operating Cash Flow is net of Interest Payments as well as Tax Payments (although in BOL's case the latter item is zero, and is likely to remain that way for some years to come).]
So by expecting EBIT to equal Net OCF you are really comparing a P&L item "apple" with a Cash Flow item "orange", if I may say so.
By way of proof, Net Operating Cash Flow always exceeds EBIT (by far), and so it should:
Historical Half-Yearly Net OCF less EBIT for BOL ($m):
So if you have assumed Net Operating Cash Flow is zero because EBIT is zero, then there is between $15m or $20m per annum that you need to add to your estimated surplus from Investing Cash Flow.
As for your statement that "it will not be easy finding $38m in 18 months based on recent form", I struggle to see how you come by the assertion that recent form has not been good.
The facts suggest quite the opposite:
Over the past 24 months, NIBD has fallen by some $45m, from $116m @ 30 June 2013 to $71m @ 30 June 2015. And that period corresponded with an inability and/or disinclination on the part of management to really attack the cost base, which they are patently doing now.
Given that, I would have thought a $38m NIBD reduction over the next 18 months would be eminently do-able.
BOL Price at posting:
12.0¢ Sentiment: Buy Disclosure: Held
(20min delay)
