re: quarterly report if your company only makes 4% NPAT after 35% GP it means your fixed costs are high or you are around breakeven point.
every company has a breakeven point where sales breakpast the fixed costs of running the business...TEE has broken past that point.
COGS is calculated in GP%..... GP% = Revenue- COGS (vairable costs and OPEX realted to product sales).
EBITDA includes Overheads and fixed OPEX relating to fxed cost of business operation.
any company with a 30% GP is normally in a pretty good sitaution as long as they can get past the sales breakeven point of the business,
A pure services company does not have requirements for physical product creation and hence can always work on a low GP% margin, and will not have large working capital draw downs...however it also will have to make large sales in order to get a reasonable profit- not so with high GP% product sales where lesser revenue is requried to make a decent profit, but the trade off is that a funding gap will always occur with large growth (draw donw on working capital to fund next sales orders that are invoiced on product shipment not on order received).
What I like to see in a hardware and services company is good revenue growth and some working capital draw down- as in produt costs, but with GP margin at least 30%....this means they are using their cash/bank facilities to produce product for the next few months sales they have already secured and at 30% gross profit (this more than covers any interest for working capital draw down).....it worries me to see a company in this same segment that has not drawn down working capital- as that means they haven't any short term sales to meet or they are working off inventory (Evans and tate problem) which is not a psotiion you want to be in.
My mate used to be marketing manager for a large international telco and Product manager for one of the largest international product/hardware providers in IT- this is what he teaches me to look for and understand.
My posts are to let people understand what segment Tele-IP really is in and what the numbers mean.
same numbers in two different industries mean two toatlly differnt outcomes for the future.
debt is your friend if leveraged for future sales.... why not use the banks money.....that's what we do with property investment but at 80-90% debt to equity...hmmm and we worry abotu 10-15% of debt to equity in a company????
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