PEH seems to be making some improvements in some aspects of their business. However, i think the stock remains expensive, as real underlying earnings are significantly below what is reported.
To me, it seems like a significant proportion of the operating profit improvement over the last few years is due to an accounting change.
To summarize, R&D grants are now accounted as other income, a component of EBIT, instead of flowing through the tax benefits line, below EBIT as it did pre 2013. In the notes to accounts it clearly states NPBT in 2014 would have been $230k under the old accounting policy, some 83% below the $1.3m reported.
Further, of the $1.09m R&D grant in 2014, $0.5m had not even been lodged with AusIndustry, the R&D claim processing division, at June 30, despite being accounted as a receivable.
Does anyone have any views ?
EVS Price at posting:
6.5¢ Sentiment: Sell Disclosure: Not Held
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