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Didak

1,006 Posts.

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03/12/16

23:03

Post #: 21086282
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Originally posted by MarsC ↑

Operating cashflow's have definitely been growing since 2009, and perhaps earlier.

But there's two thing's that should be kept in mind:

1. Not all of those cashflow's are available to distribute to shareholder's or to expand operations, or even to pay down debt. After FY2009, when it appears most of the growth investment was completed (the bulk of it), addition's to PPE (mainly plant & equipment) have been running at close to 4% of revenues. With revenues averaging about $93m in the last few years, it's probably a fair guess that over $3.5m in capex is required just to sustain current operations. This has been masked in the past because of the heavy usage of finance leasing, the repayment's of which are shown under the "financing cashflow's". However, these are akin to capex.

But if we want to talk about the cashflow's that really matter, that is the free cashflow's, then we need to subtract this amount (or whatever you think is a fair estimate, if you don't agree with mine) from the operating cashflow figure's.

2. Also, in FY2016 nearly $2m was released from working capital (I believe). In the prior two year's, working capital actually consumed a fair amount of cash. So we probably can't rely on continuing reduction's in working capital, going forward, to beef up the op cashflow's.

So, by my reckoning, for what one year's number's are worth, FY16 indicate's underlying free-cashflow's of about $8.3m. This, incidently, compare's well with the reported net profit for the year ($8.1m).

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I agree with your points. In David Heys book about financials statements he writes about current year operational cash flow being a predictor of the next year net profit... This incidentally works out so well for frm since 2012/2013... Minus a 1-2 million.... So I really believe they will hit 10-11 mil npat this year if no operational surprises.

You are right with fcf points, they spend around 3 mil for equipment, but Eg in 2014 they spent only 600k, not sure what is going on there. I think this year they will spend a bit on automation projects and farm upgrades - probably another 2-3 mil? Ok even with 9 mil fcf that will get us to 12 mil in a bank by end of june if no acquisition.

The only one point on p&l i dont get is Other Expenses - they webt down buy I never got an answer whats in this bucket.
All in all I am happy company can fund upgrades from genereated funds.

FRM Price at posting: $1.60 Sentiment: Buy Disclosure: Held
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