Assessing each claim in turn: Biological Assets Spent 5,605 and...

Assessing each claim in turn:

Biological Assets

Spent 5,605 and amortised 5,333 for a net decrease to OCF of 272.

FRM correct.

Increased Tax Payments

Income Tax Expense 1,880 and income tax paid 3,316 for a net decrease to OCF of 1,436.

FRM correct.

Overall Changes in Working Capital



FRM Correct.

Overall

A bit more evidence is needed to claim that management are misleading shareholders. It does not follow that because EBITDA does not convert to OCF - for one period - that management are pulling a shifty. @MarsC: why do you think that poor EBITDA-OCF conversion is a bad thing - for one period - if you are a long-term investor?

The report clearly noted the 'cyclical nature of the egg industry' and evidence supports their claim: a build-up in inventory, an increased spend on biological assets (maybe a higher quality chicken instead of greater quantity?), an increase in receivables (faster than Revenue), and high past Capex (with low forthcoming commitments as per Note 6). Keep in mind also the Current Tax Payable item on the balance sheet is much reduced and the future impact on OCF is mitigated after this result.

The real question is whether any of their working capital spend will be written-down, which would indicate poor capital deployment. Possibly wrt inventory; unlikely wrt receivables (we know Woolies and Coles might be struggling somewhat but...); unlikely wrt Capex (necessary one-time free-range upgrades to maintain competitive position). The Korean saga has arrived fortuitously for the Australian egg industry and there is potential to dispose of some excess supply there.

I do, however, agree with you that the public market reacted savagely; and, as noted, this company would be better off in private hands with its strong financial, market, future cash flow positions.