Is the honeymoon over?, page-10

Cash flow of $350k is not profit of $350k – there are two different things.

Cash flow doesn’t take account of accrual accounting or non cash costs which are included in a company’s year end result.

So multiplying the 350k cash flow by 4 and thinking this is a forecast for the year end result is not correct – there will be other costs that will get included in the year end result (and the half year too).

I also recall in the webcast a couple of them made this mistake as well confusing the cash flow positive position with profit.


Also the 40% margin is a target and they are not there yet. For the first quarter they were at 23% (up from 18%). This 23% is also an average for the first 3 months of the financial year.
The next quarter the average is likely to improve and the subsequent quarters so that certainly later in the year for say a given month they may be at 40%. But ultimately the average for any quarter and the 2017/18 year will be weighed down by lower margins in the earlier months so they may only end up with an average margin around 30% for the entire year and not an overall average of 40%.