The result was fairly "as expected". In terms of cash (which I like to think of for KME because of the temporarily (I hope) high D&A), they brought in A$1.4m in cash AFTER paying out about A$1.1m in dividends and buybacks. So cash generation of A$2.5m in a steady-as-she-goes half is not bad for a A$30m market cap company. There were a couple of tailwinds built into this, about A$0.2m in foreign currency gains (which will have all reversed by now (AUD-GBP)) and some tightening of their outstanding payables/receivables that netted them about A$0.5m, so if I push the cash generation back to A$1.8m and annualise it (second half usually higher revenue), it still looks like a 10% after tax payout is comfortably within the ability of this company. Not to mention about 20% of the market cap in free cash and no debt.

It never looks good with declining revenue, however I think the story of consolidating in the best franchises and corporate centres seems to be holding water, with lessons per centre up even though they've pushed through some price increases. So this trend of slightly declining revenue should stop, or progress into growth if they can get a good strategy together and execute in partnership with their franchisees.

Which brings me to the conference call? Were any strawpeople able to attend the conference call? I was at work, missed the presentation but caught the Q&A (albeit was still a bit distracted), so would love to hear anyone's thoughts - here are mine:

• The CEO was new but I thought she was impressive. She had a "warm and highly capable principal" feel about her, which I think is ideal for re-invigorating a bunch of teacher run franchises. She shared some anecdotes from the franchisees, sounds like she has been engaged and "walking the floors" in her first few months.
• She was optimistic about organic growth, she thinks with better systems and culture they can get franchises returning more, win-win for everyone. Default position for new management to be optimistic, so time will tell.
• I thought there might have been a special dividend this half or next, but not to be. One of the private investors on the call asked about use for the cash and she wouldn't rule out M&A. This wasn't part of my thesis, in fact vain attempts at growth were a yellow flag. So if something like this happens I will be dancing a little closer to the door. I do acknowledge though a fully funded acquisition could grab the market's attention a bit, potentially accelerating a re-rate.
• The CFO was much drier - he's a CFO after all. Think they weren't a bad ying-yang. He was pushed on what low double digits NPAT growth looks like and he said more than 10, less than 25%. The CEO actually chuckled that its a pretty wide range - but you've gotta feel for the guy, that's only a ~A$0.4M range given the overall numbers are so small - so he can't be too specific! I did feel he was trying to be conservative, continued appreciation of the AUD vs GBP could hurt their numbers a bit.
• The CFO did clarifty that the NPAT growth was based on last years normalised NPAT, which is actually higher than the statutory, so its low double digits growth off a base of about A$2.8M.
• I also thought the investors asked smart and long term focused questions, no fast money here :)

Overall I came away from the 10 or so minutes of Q&A that I caught more optimistic than I did after reading the results on paper.

Held IRL and SM.