I think you'll find that for FY2020 they reflected occupancy expenses under each divisions cost (Product design & development, Sales & Marketing etc).
I suspect as a result of AASB 16 they probably had to change the way they treated lease costs hence it's been pulled out of the divisions costs and put under Depreciation & Amortisation (so EBITDAF has actually increased).
Actually what I did not like was the fact that they are only expensing ~25% of the investment in the Catholic sector and capitalising the rest. Arguably they are building the IT infrastructure that will generate revenues over multiple periods, so technically correct, but if you look at a company like CSL they expense everything immediately......much more conservative and also easier to ramp up/down profits when you take that approach as it has a direct impact to the bottom line. Capitalising and depreciating leaves you little wriggle room 2-3 yrs down the track when you have to reflect a huge depreciation expense thru your P&L (if you are trying to manage the bottom line). Cash impact is all the same.
On expansion and M&A, I'm also glad to see them starting to talk about broadening their customer base....yes the Catholic sector makes sense, but I suspect will be less profitable than the big churches they now have (catholic parishes are much smaller so they will have to capture a decent share and it will take some time). I thought I also heard something about the non profit sector......if that is correct, I think that can be a huge increase in their TAM.
PPH Price at posting:
$1.52 Sentiment: Hold Disclosure: Held
