And makes no mention that interest and tax will mean cashflow is likely to be less in the long run. Either he's stupid or trying to make a headline.
Can you quote me an AUS company is cashflow consistently > 70% of EBIT and not due to increased borrowing or maybe deferred tax assets? I'd then question how this is the case.
We all know Slater and Gordon have debt and tax obligations... so what is the point in comparing cashflow with EBIT without calling that out?
Compare Net Profit (includes interest and tax) with cashflow if you want to get anywhere near 100% conversion. Any difference in the long run there is likely to be due to either A> acquisitions funded out of profits or B> valuing WIP too highly.
As said previously, if cashflow is before interest and tax, my argument is null and void - and I'll eat humble pie.
SGH Price at posting:
83.0¢ Sentiment: Hold Disclosure: Held
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