Good morning!

A couple of things today:

GetBusy (LON:GETB)

  • Share price: 52.5p (+2%)
  • No. of shares: 48.4 million
  • Market cap: £25 million

In yesterday's report I looked at Getbusy, a document management business. I mentioned the company's use of adjusted earnings numbers and certain points raised by its auditors in the company's 2017 annual report.

Paul Haworth, Getbusy CFO, has kindly responded with additional detail and explanations, which I am glad to share.

Paul Haworth: Thank you for taking the time to comment on GetBusy’s results today; I know that this column is followed by a good portion of our UK retail investor base. I thought it would be helpful, if you’ll allow me, to provide some context to some of the points you’ve raised in your column.

Firstly, I wanted to provide some more information about why we quote “adjusted EBITDA” and what it means to us. As with any growing business that is cash absorptive, we need to closely watch our cashflow and ensure we’re making very deliberate, evidence-based investment decisions. It’s important to us to track a profitability metric that most closely matches what cash is doing. IFRS measures of profit rarely do that. So we take our IFRS operating profit and make the following key adjustments:

• We make sure all development costs are expensed. Why? Because development capitalisation is one of the most horribly used and abused tricks up a naughty CFO’s sleeve. There is so much judgement involved in capitalisation, and it is such a difficult area for auditors to really get a grip of, that it is often used to manipulate earnings in the short-term. That’s wrong, and it certainly doesn’t help with cash management. So all of the development capitalisation that the accounting standards require us to do is done “below” Adjusted EBITDA. We think that’s transparent.

• We remove the impact of any share-based payments. These are non-cash and the…

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