Where’s Joe, page-42

Just got around to reading poor old Joe's article on the Ewen Couch due diligence. What a disgrace!!!
Anyone else notice that poor old Joe is convinced that CTD financials are 'bogus' but has no idea where, who, how, what and why - that's a pretty big miss!! Pretty well lines up with VGI. If he is lucky he may get a pat from his handlers. If he behaves maybe they will even give him a 'sniff' of a report and throw him a few doggie biscuits as a treat. I would be careful he seems like the type who could turn on his handler. A muzzle would be necessary as a safety precaution.
It may well be that they all still rely on those shown to be limp red flags but they are to embarrassed to say so?? Any wonder! Whatever poor old Joes does not have a clue. It seems poor old Joe would not recommend a discussion of the financials with professionals who have actually worked with the accounts? Rather he would recommend he seek the guidance from those who have had no more access to the financials than 'the average man in the street'. No one has probably bothered to tell the him that VGI has a massive financial stake in CTD heading South and are sure to run the negatives. No one has probably bothered to tell poor old Joe that it seems that just like him no one at VGI has a grasp of basic year 11 Accounting. Believe me you can have a masters in Business and still not understand the very basic accounting principles. I have seen it time and time again.
Have to laugh, Read an article that contained a VGI sourced quote shortly after the report was issued in Oct'18. They said the red flag Revenue recognition could have made a material one off addition to FY18 revenue. Well as it turned out the addition was an immaterial $500k and being a one off there has been 2 reports since so its well and truly dead and buried. I'm betting they don't get that!!
Anyway my last post was very wordy and the simple table put together using Year 11 basics was probably lost. I will include it again below. The table shows the relationship between change in payables to suppliers and employees from half to half balance sheet, the accrual affects, its relationship to Cash Conversion and cash on hand. I have added the NPAT for each period. The relationship between all these and the trend in each period is very obvious. VGI and/or poor old Joe will not comment because they know I am right. They will just ignore it because its the safer course.

	1STH18	2NDH18	1STH19	2NDH19
	12/17-6/17	6/18-12/17	12/18-6/18	6/19-12/18
Change in payables B/Sheet	-19422	55841	-37006	119308
note 1st half (ending 31st Dec) negative change in payables which means less accruals
Cash conversion disclosed	65%	110%	45%	160%
Cash on hand at period end	72380	84297	74210	138791
Cash on handdifference	-8%	36%	-14%	87%
NPAT	32336	80852	40639	89473

The skew to the 2nd half means that the difference in balance sheet current payables is much higher in that half. This is due to timing/accruals. The accruals are liabilities incurred in one half but not paid until the next half. Apart from the increased activity of a growing business this is because corporates and Government tend to do less travel in December before Xmas than in June - so half 2 higher balance. This is especially so in ANZ with a June end financial year. Not sure of financial year dates in other regions. In this instance accruals are liablities incurred in June but not paid until July.
I am not very good at explaining things but the primary reason for negative difference in payables at the 1st half 31st Dec ending periods is way lower accruals at the end of that half than the busier 2nd half.
Note how the Cash conversion as expected is low in the less active 1st half and greater than 100% in the more active 2nd half. The table clearly demonstates that you need to look at Cash conversion over a period of time and not an isolated period as VGI would have you believe. Its quite clear. VGI and poor old Joe just do not get it or with $50 million at stake maybe they just do not want to get it???? Readers can make their own call on this.
I note that cash has had a massive increase of 87% in the 2nd half of 2019. The Payables have also had a massive corresponding increase but are still way below the cash on hand. VGI intimated that payments were delayed to hide cash issues. The fact is there is plenty of money to pay them. The full period impact of LOTUS came into play in the 2nd half of FY'18 as well.
A quick check of the liquidity ratios sees CTD very, very solvent. I seem to recall poor old Joe in his ignorance bleating that CTD had cash issues. If i am wrong and he was actually praising CTD as a cash cow let me know and i will formerly apologise!!
If the Cashflow cash balance at end equals the cash disclosed on the Balance Sheet and Bank statement as it does with CTD i can tell you no amount of restating cash flow is going to change the cash balance shown. It appears poor old Joe and VGI do not quite grasp that simple concept or maybe they just do not want to???? Again your call.
The table above covers 2 financial years. Due to rapid growth it is pointless to use more than 2 years whereas with a very mature low growth business you might use up to 5 years.
Check out the numbers trend down the column for each half and it all falls into place. Can't beat basic Year 11 Accounting principles.
Oh and poor old Joe and VGI have dished it out big time so they have to wear it on the way back.