Growing in size profit and strength, page-18

Very well. I get it - profit today is not cash today, because there's a 2-to-3 year time lag until cases settle. They suck up their expenses in cash immediately, but the revenue doesn't gush through the door in cash until 2-to-3 years hence. Fine.

So, here's my tiny pea-brained attempt to test that theory. Below i compare P&L EBITDA reported by SHJ in a given period, relative to cash profit (which is simply gross operating cash flow, less adjustment for net working capital movements) 2-3 years hence:

FY13: EBITDA $28.0m. FY15 cash profit (2-year lag) $16.9m. FY16 cash profit (3-year lag) of $17.8m.
FY14: EBITDA of $34.5m. FY16 cash profit (2-year time lag) of $17.8m; FY17 cash profit estimate of ~$18m (50% conversion of $36m EBITDA).
FY15: EBITDA of $44.4m. Again, we don't yet know what FY17 cash profit is, but i am thinking my 50% conversion of $36m is in the ballpark.

So, from FY13-FY15 they reported cumulative EBITDA of $107m. If we assume they generate ~$18m cash profit this year, then in FY15-FY17 (2-year time lag) they will have generated cumulative cash operating profits of ~$53m. So, if we assume your 2-year time lag theory and we assume this is a perfect like-for-like analysis, the business has still generated a cash conversion ratio of <50% even allowing for a 2-year time lag.

BUT WAIT, THERE'S MORE. The above isn't a perfect like-for-like analysis, because of acquisitions (particularly FY15's feverish acquisition activity). Why? Because i am looking at FY13-FY14 EBITDA (which obviously doesn't include FY15's acquisitions), and then comparing those to FY15-16 cash flow, which obviously does get the cash flow benefit of those acquisitions. So, according to my pea-brained attempt to test the 2-year cash lag theory by doing the above extremely simplistic analysis, SHJ is converting at less than 50%, and that 50% is extremely flattering to them because i'm pretty damn sure those FY15 acquisitions (which had annualized EBIT of $12.6m in aggregate) are contributing substantially to cash flow.

So, after you've digested this, and had a Bex and a good lie down, and relaxed a little, and taken some of the emotion out of it, please tell me why i'm so stupid as to assume that SHJ might...just maybe...just possibly....be.....you know.....grossly overstating their P&L profits?

One more question quick question if i may: how many more years do you think SHJ shareholders will have to wait to get FY13's $28m of EBITDA in cold, hard cash flow? And how many more millions of dollars of acquisitions before SHJ get there? I'd genuinely be interested to know.