Michael West new report, page-23

While the author of Michael West's article has concerns NPAT ( and eps ) and WIP are overstated a lot of his figures are not relevant or prove nothing .
eg comparing Profit Before Tax to Oper Cash Flow is misleading.
OCF = NPAT + deprec + amort - increase in WIP / UBD - increase in receivables + increase in payables and miscellaneous changes in other assets /liab's .
And OCF has Tax Paid close to nil < Tax Expense in NPAT, all legit due to carried forward tax losses and tax on new WIP added to deferred tax liabilities.
For a growing company with growing WIP / UBD you would expect OCF < NPAT.

Based on analysis by an Actuarial firm the method to calculate provisions on WIP and UBD was revised for FY16.
Using figures before FY16 is misleading.

Rubbish SGH more believable with P/E = 51 compared to SHJ 5.
P/NTA doesn't support that, SGH at .42 and SHJ at .68
SHJ positive OCF and Dividend every year last 7 years.
SGH negative OCF 4 of last 7 years, no dividend last 7 years.
For non-current WIP / total WIP at 6/2022, SGH at 62% is higher than SHJ at 45% .

Courts closed during Covid = delays in converting WIP into Cash Flow ?

As Sab8 inferred if you are worried about WIP and eps concentrate on Oper Cashflow or Free Cash flow.
Any writedowns in WIP doesn't affect Oper Cashflow.

The grey area I see on WIP is that accounts from FY20 to FY22 only include net WIP and UBD ie gross figure and provisions not shown.
Still using the actuarial method to calculate provisions but the amount is not shown .
No evidence of wrong doing.

From Commsec financials for SHJ, allow for rounding by Commsec:
Aver operating cash flow per share :
FY18 11c
FY19 13c
FY20 14c
FY21 28c
FY22 6c
5yr aver OCF = 14.4c
5yr Aver Capex = 2.4c
Aver Free Cash Flow FY18 to FY22 = 12 c ( or aver last 2 years 14.5 c )
Last 5 years total Free Cash Flow = 72 cents compared to dividends 22 cents.
Suggests a payout ratio of 31% - TOO LOW FOR A PROFITABLE INDUSTRIAL COMPANY !
PLENTY OF EXCESS CASH FLOW OVER DIVIDEND TO START A BUYBACK !

# employees 6/2017 = 855 .
# employees 6/2022 = 1098 .
You would expect higher WIP & UBD for a growing company.