Thanks Transversal - just wanted to acknowledge your post, i...

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Jimmy_C

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21/03/17

02:11

Post #: 23497257
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Originally posted by Transversal ↑

Having had a further look at the points you raised in your post, I did dig a bit deeper into the EBITDA/cashflow conversion, and noticed a trend that could potentially raise some concerns.
That is the buildup in Net Payables, which have increased from a low of 2.28m$ in FY2009 to as much as 65.90m$ in FY2016; the latter figure corresponds to a non-immaterial 9.56% of current annual Operating Revenue.

The majority of said Net Payables (50.48m$ out of 65.90m$) was accumulated during FY2013 and FY2014, which also happened to be the period of most intense acquisition activity by the Company (60% of the whole consideration paid by GEM for acquisitions in its listed history settled during those two years) and this trend appears to have materially slowed down over the past two years:

[Current Receivables]-[Current Payables]

FY2009: -2.28m$
FY2010: -10.51m$
FY2011: -19.82m$
FY2012: -10.92m$
FY2013: -30.21m$
FY2014: -61.40m$
FY2015: -60.11m$
FY2016: -65.90m$

The relevance of this to the EBITDA/cashflow conversion is that, had those net payables been settled within the corresponding financial year, then the [Net Receipts]/EBITDA ratio would have been affected as follows:

{[Net Receipts from Customers]-[Net Payables]}/EBITDA

FY2009: 112.26%
FY2010: 0.62%
FY2011: 23.75%
FY2012: 119.83%
FY2013: 69.04%
FY2014: 70.28%
FY2015: 99.68%
FY2016: 93.40%

Which is not quite as good as the EBITDA/cashflow conversion figures reported by the Company.

So, while the difference is not dramatic and the buildup seems to have now stabilised, this is something definitely worth keeping an eye on going forward.

Cheers

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Thanks Transversal - just wanted to acknowledge your post, i will get around to reviewing your work here in a bit more detail before too long (maybe once i'm done handing out free accounting & valuation classes over on the SHJ thread...).

Cheers

GEM Price at posting: $4.14 Sentiment: None Disclosure: Not Held
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