Insomniac im not sure what you are referring to when you talk...

Insomniac im not sure what you are referring to when you talk about cash flow are you talking about operating or overall?

Operating cash flows have increased significantly over the past few years,

2014: 54,842 (NPAT: 66,492)
2013: 32,717 (NPAT: 47,165)
2012: 15,959 (NPAT: 24,241)

There is a lag time between NPAT and cash flow due to the nature of the business and the debtors days being approximately 90.

Effectively this represents the cash flow generated from the core operations of the business. Now once you have the cash from the business you can do a number of things with it:
1. Pay dividends
2. Pay debt
3. Reinvest in the business

Point 3 is effectively what SGH are doing by acquiring additional businesses, in order to grow earnings almost any company needs to get its cash flows from operations and invest them back into the business. Take woolworths for example there is no way the business would be earning as much as it is today if it didnt reinvest its operating cash flows into opening new stores, so each new store is effectively being paid out of cash as you put it which is perfectly sustainable provided the following:

1. You have the cash to finance the investment.
2. The investment isnt a complete dud.

The easiest way to measure the success of investments is by watching D/E ratio and also watching your incremental return on equity. (change in earnings/change in equity) or watching the trend in roe. If cash is kept in the business your retained earnings will grow and effectively you should see a corresponding change in overall earnings.

If this is not happening then this is an obvious red flag as to why the cash being spent on growing the business but there is no earnings growth being seen. I do not dispute the other parts of your post, in any investment there is risk, and the size of the investment only magnifies the risk. Look no further than Wesfarms, the cash cow that is Bunnings was used to finance and support the acquisition of coles. On the other hand cash flows from woolworths are being used to finance the masters JV.

I tried to address your point in relation to these comments "To some extent I have been posting, hoping someone could refute my cashflow is poor thesis. Some flippant recourse to Buffet and Graham is the only riposte. I initially was wanting to buy in thinking the was an opportunity to snare a bargain, on sunday i did a bit of research. ... the cashflow was the problem and stopped me buying" but you dont mention specifically what about the cash flow it is that concerns you.

Please DYOR, post is not intended as investment advice.