I feel I should make a couple of comments on this as the first...

I feel I should make a couple of comments on this as the first page of this presentation if read alone may leave some with not quite the right idea about the strength of their cash flows. For example, "Free operating cash flow pre-factoring improved by $166m compared to HY20" sounds good, doesn't it? And "Generated free operating cash flow pre-factoring of $51m in 2Q21" again sounds good, but fails to mention the larger negative 1Q21 operating cash flow. In fact out of all of the good news cash flow lines presented on the financial overview page, they don't mention the actual HY21 (the period being reported on) cashflow numbers (you'll need to scroll down a couple of pages in the presentation to find some of these numbers and further again to find the rest of them, or you can look in the financial statements), which are negative $329m for operating cash flow, or if we exclude factoring movement (which they never used to do in their presentations when factoring was improving operating cash flow), a slightly better but still abysmal negative $86m for the half year. Then lets work out free cash flow, take out -$30m for bau net capex (lower than average must be minimising capex) and in my view we should also take out repayment of leases -$46m (historically would have been operating cash flow) and we have free cash flow of -$152m for the half year excluding factoring and -$394m including factoring movement. Note there is still a factoring balance of $733m which will be a cash outflow in future periods if it continues to be unwound, which appears likely.

They did however record a positive npat for the period of $208m, so the misalignment between npat and free cash flow will have to appear somewhere in the balance sheet movements. The two obvious ones are trade receivables have increased and trade payables have decreased, both significantly, some of this movement will of course relate to the debtor factoring movement buried in the balance sheet. Of note is that trade payables is still $4.1bn, even after the decrease which is very large in comparison to their business, they had $4.4bn in expenses from continuing operations for the 6 months, which includes staff costs which wouldn't be much or possibly none of the trade payables balance. So therefore their trade payables is larger than 6 months worth of non staff costs, which seems very high. The reason I highlight this is I'm not sure whether this mismatch between free cash flow and npat is a one off, there may be more to come although of course I could be wrong.

They are now in a net debt position, even after the Thiess sale, and still have $733m in debtor factoring. It's still an avoid for me, they may do well if economic conditions line up however the cash flow and balance sheet still aren't showing much strength.