I thought it was actually a decent result under the...

I thought it was actually a decent result under the circumstances (although one needs to distil out of the result the impact of AASB 16 because with TRS's very significant lease arrangements, I haven't come across any other company whose EBITDA is impacted more than TRS's).

But the most interesting aspect of this result to my way of thinking - far more interesting that how like-for like sales are going (they are going ok) or how the gross margin is holding up (it's holding up just fine, despite the lacklustre retail environment and the weakening A$) - is the following:

While the December half is always the seasonally dominant half year, the cash flow performance in the last half was particularly strong, especially since it included a $7m increase in inventories (i.e., it was delivered even before the new management team has got to grips with rationalising slow-moving SKU's).

When I first saw the cash flow statement, I had to do a double-take, because of this:



$100m of Operating Cash Flow less $6m of "maintenance capex" in the form of PP&E payments implies $94m of Free Cash Flow... an undeniably large number in the context of a $100m market cap company (even taking into consideration that June halves tend to be cash-flow break-even or slightly cash-flow negative).

But then I saw that, out of that ~$95m of Free Cash Flow in the half, $49m was allocated to repayments of the principal on lease liabilities.

This has reduced lease commitments to their lowest levels for as far back as I have tracked them:



TRS's total lease commitments have been falling gradually in the last few years, but in the last 6 months they have taken a quantum step down, reducing by $56m (equivalent to a 20% reduction).

I'm not too sure how they are doing this, whether they have simply not renewed leases that have expired or whether they paid out certain onerous leases as part of the renegotiation of those leases.

Whatever it is, they are today generating Revenue that is some 40% higher than 6 or 7 years ago with lease commitments today that are 30% lower.

It's all a bit strange to this inexperienced retail sector follower; I suspect it somehow might relate to the highlighted part below, but i can't be certain:



I intend to make contact with the company in due course to clarify, but until then, if anyone has any ideas relating to the above observations, then I'm all ears.

Something substantial seems to be stirring under the seemingly-calm surface, but I'm not sure what the scope and and magnitude of it might be.