This looks like a particularly strong result, with an impressive second-half performance which was well ahead of my modelling (not that my modelling is up to much):
Stripping out the second half, EBITDA and EBIT came in some 13% ahead of my expectations and underlying NPAT (i.e. pre- the writedown of intangibles, as well as a list of accounting adjustments as long as my arm) was a whopping 20% higher than my forecast.
But the highlight of the result was the Operating Cash Flow, at $108m (pcp = $63m), whihc was well ahead of my expectation of some $70m.
As a result, NIBD ended the year at $146m (down from $170m @ 30 June 2014), and an impressive improvement on the $221m level as @ 31 Dec 2014.
As a result of higher-than-expected EBITDA and lower-than-expected NIBD, the ratio NIBD-to EBITDA is 1.4x, compared to my estimate of somewhere closer to 2.0x.
I suspect that one of the main reason that this merger pair has not traded at a level that reflects the merger prospects in valuation terms, is because the market - and notably PRG shareholders - have been wary of a potential disappintment with this SKE result.
I think this result - especially the cash flow and lower debt levels - will make investors see things in a different light.
According to my maths, and updating for today's SKE result, I see this merger pair trading at around 6.5x P/E and 4.5x EV/EBITDA on pro forma post-merger numbers (and that's using just $20m of merger synergies and not the $40m figure being bandied about by some.)
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