where did the cash go?

This latest report, going by the reported profits, paints a pretty good picture. Revenues and costs continue to look good, as do the margins. The trend, in terms of balance sheet repair, more or less continues.

There is only one small problem, the cashflow figures do not match the earnings, and not just by a little bit. Worst of all, management seems to be taking shareholders for mugs. Here is what management announced in the half year report:

"Despite the improvement in profitability, cash flows from operating activities decreased largely reflecting the impact of increased company tax payments and increases in inventory and biological assets."

Really??? Because by my numbers, changes in biological assets, or in working capital, or for that matter in taxes, do not even come close to explaining the shortfall. This is extremely disappointing from a management that I thought could be trusted. It is also in stark odds with records going back several years, where operating cashflows before interest and tax (once adjusted for changes in working capital) have been extremely well matched by reported EBITDA (once adjusted for changes in provisions and for cash consumed by bird flock additions).

This stands out stands out like Mount Everest. It's no wonder the market has reacted so savagely. If I was a shareholder, I would be demanding an explanation pronto.