Yep - I don’t like the CTD calculation method, ie using the FY18...

Yep - I don’t like the CTD calculation method, ie using the FY18 pack the waterfall chart and their ‘Organic Growth %’ as an example ....

- the $98.6M is the FY17 reported EBITDA ... not the running rate at end of FY17
- the $8.6M they take out for the acquisitions is based on the business performance for the year before the acquisition was announced ... so growth between announcement date pcp (Dec15-Dec16 period) to whole of FY18 is obsorbed into supposed ‘organic growth’ of the business with the acquisitions removed. This is despite claiming 31% constant currency EBITDA growth in FY17!
- this method also lumps synergies from the acquisitions into ‘organic growth’ of the base business
- the $500K CTD says it gained from the accounting change has been lumped into ‘organic growth’ too
- they’ve separately made a $100K adjustment for overheads (and a more significant $2.2M in FY17)

If I adjust for these items as a back of the envelope calculation (except synergies as I have no way of estimating) my calc of organic growth is in range of 15-17% vs their 19%. So still good, but not quite the exceptional numbers reported using CTDs assumptions of what constitutes ‘organic’ in their management accounting.... and it’d be lower if synergies were allocated to a benefit of acquisitions rather than ‘organic growth’.

So IMO, their CTDs ‘organic growth’ calculation is too simple and is systemically overstated whilst they’re still acquiring businesses. And, very difficult for one to estimate what I’d call a fair calc.

Have a look at the Lotus acquisition info for another example ... they state cost benefit, scale synergies and a higher pro-rata contribution for FY19 than the pcp .... yet these extras will bump up ‘organic growth’ when they do their calc for FY19 and FY20 as they’ll adjust EBITDA by pro-rata HK$22.5Mpa despite projecting $24M inFY19.

All IMO only and of course DYOR.