I decided to have a closer look at cashflow given it's poor...

I decided to have a closer look at cashflow given it's poor performance for the half year. It's a pretty significant difference between EBIT and cashflow, so I was curious to see whether simply timing was the cause or something more concerning was at play.

An extract from Directors report explained the decline in cashflow was "due to significant licence sales in the last two months of the half, which will be collected early in Q3. The situation was further compounded by a significant tax payment in the first half. Operating cash flow will improve substantially over the full year."

The last part (ie: cash flow will improve substantially over the full year) is somewhat comforting. Regarding the comment of licence sales towards the end of the year I am a bit perplexed. If that were in fact the case I would expect to see:
a) higher sales in the P&L than cash receipts from customers in the cash flow.
b) An increase in trade receivables
However, cash received from customer is slightly higher than sales (after adjusting for GST) and trade receivables have increased by only $1.4m. In other words the numbers don't align with the director's explanation.

The bigger issue appears to be payments to customers significantly outweigh the expenses accounted for in the current periods P&L.

The payments to customers in the cashflow is recorded as $96,951.

My estimate of payments made to customers is:
Current period expenses $66,983
Adjust for non-cash exp's. ($ 2,394)
Add GST (Exc wages) $ 1,443
Total cash costs per P&L $66,032
Plus payable at 30-sep $19,673
Less payables at 31-Mar ($16,067)
Estimate of cash spent of exp's $69,638

There's a difference between my estimate of cash paid to customers and the figure recorded in the cashflow of about $17m. I can find a few small variances but nothing glaringly obvious that would cause this sort of variance.

The poor cash flow performance seems to have little to do with sales, as the directors reports suggests. Rather it looks to be an issue with payments to suppliers.

Is this a stuff up by the accounting team/auditors? maybe a classification issue? or am I just missing something???

I'm quite keen on this company. Though like so many good companies at present, the valuation is a bit steep for me.