Good Moderate Growth, page-4

just as an illustration of my point about LHC's mgmt focus and lack of financial progress, I did a little more analysis on LHC. "Pro forma NPATA" (as reported by LHC) was 7.0m in 2013, and 7.5 in 2014 (per the 2014 annual report). "Underlying NPATA" was 8.7 and 8.8 in 2015 and 2016. But since 2013, according to my spreadsheet they've invested $36.1m in capex and acquistions (per their cash flow statements. and including the Dec 2016 half).! Ie, the new investment consumed all of their pro forma/underlying NPAT over the four years 2013, 2014, 2015, 2016. For what? To grow pro forma NPAT (mgmt's measure) from 7m to 8.8m (over 4 years).

The analysis gets worse when you include working capital. Net working capital was 12.6m (CA-CL; or 20.6 if you exclude debt) in 2013. By 2016 it was $33m (and it was $33.7m as at Dec 2016). Ie, a further $20m+ has been invested in Networking capital. (By way of partial explanation, inventories have grown from $24m to $35m; and receivables from $12m to $25m.)

So the weak profit growth being achieved has required a disproportionate increase in capex/acquisitions and in working capital. How is shareholders' wealth being increased?? Perhaps I just don't understand the company well enough, but it doesn't seem a winning strategy. And the December half year result doesn't look like an improvement to me. GLAH