Supremex Inc T.SXP

capital allocation - math

[HermannHaller]

The company generated $26 million in free cash flow in 2021 (as calculated by mgmt).

The dividend will cost them $2.6 million this year.

If the NCIB was buying the MAXIMUM allowed number of shares, EVERYDAY this year, at the current share price, the cost would be about $12 million.

Bottom line: they have plenty of money to be buying back shares

[Capharnaum]

They still only had a bit over $6M in cash at the end of Q4 with an income tax charge of over $4M coming up.

[HermannHaller]

Only? But why would they keep a high cash balance when they have a revolving credit facility? (which the paid down by about $9 million during 2021) Also, as in my last post, they generated $26 million in free cash flow for the year, that is over $2 million per month coming in. Part of this should be going to buybacks IMHO.  

[Capharnaum]

$6M isn't a lot of cash in the bank with a tax payment of $4M due (net is $2M!). That doesn't even consider they may have capex/maintenance costs that aren't weighted through the year. Plus, if they want to make an acquisition, they'll need to firm up that cash position, otherwise it will be limited to their debt facility and it will impact the ratios (including leverage). I know

[HermannHaller]

I care about debt, I just think people are under-appreciating how much cash flow this company generates. The debt ratio at the end of 2019 was 2.1x, since then they made the Royal acquisition and have managed through two years of pandemic. But the debt ratio at the end of 2021 was only 1.1x. This company generates a lot of free cash! As you may know, a revolving facility is designed to be drawn