SLR profited from a huge tax benefit which contributed AU$124m to profit in FY20. This is of course a bit out of the ordinary, given it is more common for companies to be paying tax than receiving tax benefits! Tax benefits can temporarily boost statutory profit in the year it is booked, but subsequently profit tends to revert back in the absence of extraordinarily strong growth. So while it's great to receive a tax benefit, it can overstate the sustainable earnings power of the business if misunderstood. That said, revenue was up 6% this year as was EBITDA (12%). Cash an bullion up a decent 23% which is great. However, cost of sales was up (which is not good) and FY22 guidance of AISC at A$1,550 to A$1,650/oz is also an increased cost going forward which in the absence of strong growth could effect profit. Could be a case of under promise, over deliver as the labour shortage related cost would likely be transitory as a result of covid. Still a strong buy IMO as these are not structural issues but temporary and transitory.
SLR Price at posting:
$1.36 Sentiment: Buy Disclosure: Held
