Ann: Trading Update June 2019, page-4

@Klutch

I think you might be conflating PBT (in your post) with NPAT (which is what the guidance references).

But I agree with you - albeit it for totally different reasons - that this is really a near-meaningless update.

Because, trouble is, in the JH2018 result they called out a $0.7m forex gain as part of "Other Income".

To the extent that was a one-off item (and, given the effective tax rate in JH2018 was 32%, it appears it was subject to full tax), the second-half growth in NPAT is around 6% (at the mid-point of the very broad guidance) [*].

And we don't know to what extent, if any, further forex gains have been booked in JH2019; and we also don't know what the effective tax rate in the half was.

Also, DH2018 was a cracker of a result, with underlying growth in PBT of 145% on DH2017, so we don't know to what extent orders that would ordinarily have fallen into JH2019 were booked at the end of DH2018.

So all-up, it is a bit of nothing update, partly due to the vagaries of period-to-period reporting for a business with lumpy order flow, but also because the update itself deals with financial metrics that are not meaningful for the accounting reasons mentioned above.

But if pressed for a conclusion, I would say that it looks like a comparatively weak second-half (pending what is contained in the detailed audited accounts; for example, what investment there has been in various cost elements).

[If they really feel the need to provide guidance, I really wish companies would provide guidance at the PBT level, in order to allow insight into the operating performance of the business, without tax distortions from one period to another.]


[*] While not broad in $ terms, broad in % terms, and the latter metric is what matters when discerning the underlying growth rate of the business.