Operating cash flows, although declining in recent years due to a variety of market forces and earlier management complacency (discussed ad nauseam in older discussions) have always been solid because of good margins. Over the last couple of years a number of one off costs have hit net profit and resulted in no dividend payments since 2015. This was partly due to payouts to "retiring" executives and last years back taxes payment to the ATO. We are now also only paying one CEO not two for part of the last two financial years. Prior to the tax hit last year the board was considering it's dividend policy and ??? perhaps a return to paying a dividend. With the half yearly report due next month what are the expectations?
I am hoping that we will see a halt to declining revenues. There have been indications that the customer base has stabilised and perhaps slightly increased. A number of new innovative products have been released and advertising, promotional activities and customer service levels have ramped up. It is hoped that new product development has been funded from cash flow keeping Corum's substantial cash bucket intact. Although it has been stated that a substantial turn around will take time investors will be impatient to at least see some positive signs in the interim financials.
The major matter of interest apart from strengthening the business base and growing revenues organically relate to capital management (a recent point of criticism). With a lot of M&A activity in the eHealth space investors probably would like to be a fly on the wall of the boardroom to listen for discussion or lack of discussion around opportunities for Corum. It is alright to be temporarily investing capital in product development, service and promotion if it is absolutely necessary but if it is not a quick fix it will burn into cash reserves. The preference is to always devote a proportion of operating or preferably net profit to R&D. Alternatively it can be better to utilize capital more effectively with a profitable bolt on synergistic acquisition(s) as a way to generate improved revenues quickly. If management is happy to be patient with it's current business plan and then if they show a return to profit in the first half of 16/17 there should be a close consideration of returning some capital to shareholders or paying a dividend. They cannot continue to hang on to shareholder's spare capital indefinitely without putting it effectively to work. Mind you over 50% of it belongs to Bill!
COO Price at posting:
6.5¢ Sentiment: Buy Disclosure: Held
