Thanks for the clue Winner (I presume you are referring to note C5).
RECONCILIATION OF NET PROFIT AFTER TAX TO CASH FLOWS FROM OPERATING ACTIVITIES
|
HY2020 (pcp) |
HY2021 |
2HY2021 (calculated) |
FY2021 |
Net Profit After Income Tax {A} |
$1.321m |
$3.712m |
$2.485m |
$6.197m |
Adjustments for operating activities non-cash items |
Depreciation & Amortisation |
$3.285m |
$2.618m |
$2.668m |
$5.286m |
Impairment |
$0m |
$7.000m |
$0m |
$7.000m |
Loss/(Gain) on disposal of Property Plant & Equipment |
$0.060m |
$0.043m |
($0.005m) |
$0.038m |
Movement in doubtful debt provision plus bad debt write off in current year |
$0.099m |
$0.187m |
$0.151m |
$0.338m |
Movement in deferred tax |
($0.506m) |
($0.333m) |
($0.369m) |
($0.702m) |
Equity Settled Share Based Payments |
$0.066m |
($0.124m) |
$0.202m |
$0.078m |
Interest on contingent consideration to the vendor of JacksonStone and Partners |
$0.0m |
$0.062m |
($0.050m) |
$0.016m |
Fair value movement on contingent consideration to the vendor of JacksonStone & Partners |
$0.0m |
$0.000m |
($1.285m) |
($1.285m) |
Total Non Cash Items {B} |
$3.004m |
$9.453m |
$1.316m |
$10.769m |
(Increase)/Decrease in trade receivables, and contract assets |
$5.185m |
$28.587m |
$1.207m |
$29.794m |
Increase/(Decrease) in trade payables, contract liabilities and provisions |
($2.657m) |
($21.706m) |
($4.036m) |
($25.742m) |
(Increase)/Decrease in taxation payable |
$0.022m |
$1,904m |
($1.025m) |
$0.879m |
Total movement in working capital {C} |
$2.550m |
$8.785m |
($3.854m) |
$4.931m |
Cash flow from operating activity {A}+{B}+{C} |
$6.875m |
$21.950m |
($0.053m) |
$21.897m |
HY2021 (1st April 2020 to 30th September 2020) is the period that covers most of the Covid-19 lock down period and the comparison with the pcp HY2020 is illuminating.
1/ The first point to note is the large
$7m impairment charge, unique in HY2021, which is a non-cash item. However, I personally would not class a change in impairment as an 'operating item'. So while creating an impairment does affect cashflow, I am surprised that it changes 'operating cashflow'.
2/ Following down, the rest of the two columns of numbers are broadly similar, until we look at the decrease in trade receivables and the decrease in trade payables. This HY2021 period is concomitant with the first six months of the Covid-19 period where demand for hiring workers significantly reduced. With no new 'on the job demand', the need to pay those temp workers wages, who were not needed, rapidly decreased as well. So I can weave a story that makes the figures look like they make sense. But why is the difference between the changes in 'jobs invoiced' and the changes in 'paid work to fulfill those jobs' so large between:
HY2021 ( $28.587m - $21.706m =
$6.879m ) AND
HY2020 ( $5.185m -$2.617m =
$2.568m ) ?
This imbalanced difference has boosted cashflow in HY2021 vs the pcp by $4.311m.
Combine this with the $7m impairment imbalance and we get a
total imbalance of $11.311m. This certainly tallies with the lions share of increased operational cashflow from HY2020 to HY2021 ( $21.950m - $6.875m = $15.075m ). But it doesn't explain the inclusion of 'impairment' as an operational matter. Nor does it explain the dramatic increase in the difference between the 'accounts receivable balance' and the 'accounts payable balance' when we compare HY2021 and HY2020. The real reason for the sharp uptick in both as at HY2021 is that a 'Grant Income Receivable' is recorded in 'Trade & Other Receivables' and 'Deferred Grant Income' is recorded in 'Trade and Other Payables' in the comparative FY2020 year. These entries relate to the wage subsidy that was paid in advance.
Now Looking at 2HY2021
The other interesting point to note is that although the cash flow from operations was extraordinarily high for FY2021, for the second half of HY2021 cashflow was negative! That fact seems to have been washed aside with all the hype of the full year result.