Taking a bite at SFH, page-12

Hi

That is why there are two sides to every trade.

Need to keep working so will be brief:

To assist with what I believe are several fundamental errors with the analysis - For purposes of the discussion, I'll make the assumption closure and related costs are additional to guidance:

1. EBITDA guidance: your call as to whether to believe etc. The company had guided $14-$17m for first half and produced $18.5m underlying. Store closure costs were $1.1m for some 56 stores and there may have been another $1m odd in redundancies if we were top conservatively assume this.

The full year guidance was $14m - $20m EBITDA. Even if we assume this does not include store closure costs, we can see that another 60 odd stores (total program is come 300 over 3 years) in the second half would cash cost say another $1.5m odd. That is, second half is expected to be at least breakeven at the EBITDA line, if not positive slightly but ignore for now, with another say $1.5m reduction in closure costs cash plus another $7m capex ex (some discretionary spend in here), we get a cash reduction of $8.5m.

This compares to an EBITDA loss in the second half of last year of a whopping $12m, which translated into the same cash lost from operations loss.

So: cash reconciles as opening of $28m, less cash to reduce creditors of $20m less capex/closure costs of $8m odd equals say nil. Facility remains drawn at $6.5m compared to $22m facility limit. Stock and debtors also reduce between 31 December and 30 June, allowing proceeds to be applied to trade creditors, cash generated to be accentuated by lower stock needs in the current half compared to last.

2. Net current liability: the error here is the in substance view of the working capital and trade facility (trade stock funding related, not long term core debt to fund property assets etc) as non-current in prior periods in your analysis, compared to being current in substance.

Including the non-current portion of the facility as current in past periods, in substance there always has been a net current liability (30 June 2017 some $23m under the in substance view), ohh!...the shock horror of it all! Difference between presentation under AASB 101.69(a)/(b) compared to use of 101.69(d).