My understanding of the amount involved was not enough to explain the fact that they have high stock. If you look at the numbers cost of sales is $33 million but stock is around $22 million that by implication is 4 months stock or a stock turn of 4 per annum.
Trade creditors did not move that much as at 31 December 2015 to 31 December 2016. They may have taken discounts but in fact it did not have that much impact on PCP vs Current period.
What I think they were trying to comfort shareholders on was the fact that they did not generate as much cash flow as we expected which would have been a lot better had they not taken discount. In fact it may well be just a factor of the changing business that the half year does not generate the cash but the second half does. Or given the Capital equipment bias it may well just be hit and miss but that annually the cash flow will be there.
Look at the actual inventory levels over the 4 halves and I don't think purchasing in to take advantage of discounts answers the basic question. I also don't think that given the type of equipment that its wise to stock-up unless its consumable - my read on that hint was that the creditors was down as they took early settlement discount not related to actual stock holding.
PGC Price at posting:
75.5¢ Sentiment: None Disclosure: Held
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