Cash Conversion

Cash Conversion

Reported earnings do turn into cash, and nothing in the accounts points to aggressive revenue or reserve accounting. But FY2025's headline operating cash flow of AED 425.9m is a soft number: it is struck before interest actually paid, it leans on a one-off collection of related-party receivables, and it sits on top of a trade cycle that is absorbing more cash as the roll-up scales. Stripped of those items, steady-state operating cash falls to roughly AED 260m–320m rather than the reported AED 425.9m.

Profit does become cash — but the figure moves with the balance sheet

Over FY2023–FY2025 the group generated AED 1,429m of operating cash against AED 802m of operating profit, so on a cash basis the operating businesses are real, not a paper construction [1]. Most of the gap is mechanical: depreciation and amortisation of about AED 277m a year are added back, and the group's dairy-and-farming assets are capital-heavy [2].

The headline is also unusually volatile, because it swings with working-capital movements rather than trading. Operating cash was AED 633.1m in FY2023 — lifted by a AED 279.7m build in trade payables — then fell to AED 370.3m in FY2024 before recovering to AED 425.9m in FY2025 [3]. Any single year overstates the run-rate.

Source: operating cash from the FY2025 cash-flow statement [4] and FY2023 cash-flow statement [5]; operating profit and reported free cash (operating cash less property-plant-and-equipment additions) derived from reported financials.

What the headline free-cash figure leaves out

Reported free cash flow — operating cash less capex on property, plant and equipment — was AED 307.0m in FY2025. That number is struck before three recurring cash costs the group pays every year. Interest paid of AED 58.1m is presented within financing activities, not operating, so it never touches the operating-cash line [6]. The group also invested AED 51.6m in biological assets — the dairy herd and bearer plants that the farming operations must keep replenishing — and repaid AED 27.1m of lease principal [7].

Source: FY2025 cash-flow statement, operating and financing sections [8] [9]; all-in free cash derived from reported financials.

On a fuller basis — after interest, biological investment, leases and intangibles, but still before the AED 484m the group spent on acquisitions — recurring free cash was about AED 166.7m, roughly half the reported figure [10]. The placement of interest is not a rules breach — IFRS permits either classification — but it is a recent presentation change that widens the gap between headline and reality. In the FY2023 report, interest paid sat inside operating cash flow [11]; from the FY2024 report onward it was moved to financing, with the prior year restated to match [12].

A related-party collection did much of FY2025's work

FY2025's operating cash was flattered by an item that will not recur at the same scale. Amounts due from related parties fell from AED 501.4m at the end of FY2023 to AED 287.6m in FY2024 and AED 101.3m in FY2025 [13] [14]. The collection of that balance put AED 107.9m into FY2025 operating cash [15]. The bulk of the drop was in "other related parties," down from AED 240.0m to AED 49.8m [16].

That inflow offset the cash the ordinary trade cycle consumed. In FY2025 inventories and third-party receivables together absorbed AED 182.5m; the AED 107.9m related-party collection and a AED 5.5m rise in amounts due to related parties softened the net working-capital drag to about AED 80m [17]. With only AED 101.3m of related-party receivables left to collect, that lever is largely spent [18].

The trade cycle is tightening as the roll-up scales

The clearest quality signal is on the asset side of working capital. Gross trade receivables rose 28.1% — from AED 885.0m to AED 1,133.6m — against revenue growth of 13.5%, so days sales outstanding on trade receivables stretched from about 59 to 68 days [19]. Finished-goods inventory grew almost in step, up 28.6% to AED 394.5m [20]. Receivables and inventory are growing about twice as fast as sales.

Source: revenue from reported financials; receivables from Note 20 [21]; inventory from Note 19 [22]; balance-sheet receivables total [23].

The ageing profile is drifting the wrong way underneath that growth. Receivables past due by 121 days or more rose 28.2% to AED 151.1m, and the group wrote off AED 23.2m of bad trade debt in FY2025 against AED 4.8m the year before — a near five-fold increase [24]. The stated credit terms did not change (60 to 120 days), so the lengthening is collection performance, not policy [25].

Source: Note 20 credit-risk exposure table, FY2025 Annual Report [26].

The checks that come back clean

Three checks that would flag manipulation come back negative, and they matter to the read. First, the group is provisioning against the softness rather than releasing reserves to prop up profit: the trade-receivables loss allowance charge was AED 19.0m and the slow-moving-inventory allowance rose to AED 29.6m, both up year on year [27] [28].

Second, the cash is not being manufactured by leaning on suppliers. Trade accounts payable fell from AED 725.9m to AED 650.1m even as the business grew, so the group is paying suppliers faster, not slower — the opposite of the payables-stretching that flatters cash at weaker roll-ups [29].

Third, borrowings land where they should. The financing-liabilities reconciliation shows bank debt rising from AED 835.6m to AED 1,146.8m, with the AED 304.4m of net drawdowns recorded in financing cash flow — none of it is dressed up as operating cash [30]. One caveat sits alongside that: about AED 494.1m of the group's borrowings are owed to a related-party financial institution, so the funding that plugs the cash gap is itself inside the parent's orbit [31].

The read

The evidence points to genuine cash generation with no accounting games — provisions are being built, suppliers are being paid, and debt is classified honestly. What it does not support is taking the headline operating-cash and free-cash figures at face value. FY2025's AED 425.9m of operating cash was struck before interest, softened by a AED 107.9m related-party collection that is now nearly exhausted, and set against a trade cycle drawing cash as receivables and inventory outrun sales. On a like-for-like, interest-inclusive basis, steady-state operating cash sits in an AED 260m–320m range rather than AED 426m — about AED 260m stripping both interest and the one-off collection, roughly AED 318m stripping the one-off alone — which leaves the operating business a thinner cash generator than the reported numbers suggest, and widens the funding gap the group fills with debt (Capital Allocation). The strongest fact on the other side is that leverage is still modest and the ageing, while drifting, is fully provisioned (Three-Year Financials). The read would tighten if trade DSO and the 121-plus-day bucket stabilised and operating cash held up without related-party inflows; it would loosen if receivables kept outrunning sales and write-offs climbed again.