Ann: Appendix 3B - Performance Rights and Options, page-2

There are two things that need to be addressed for this to trade on a decent profit multiple.

1) They need to stop diluting shareholders with all these options and performance rights. Ironically, the performance rights are designed to align the interests of management with shareholders and improve the share price. At least with cash bonuses there is no dilution, performance rights incur both a cost and erode shareholder capital.

I note the 6 million performance rights issued as per this announcement don't even include Domenic Carosa so we can expect another hit later in the year.

Then there are all these bonus options issued to financiers. In fact, the borrowing costs in general are very high given interest rates are so low at the moment. For example the JGB convertible notes were already costing 15% per anum before the extra options issued as per this announcement.

"The headline coupon rate is 6.25% although the effective finance cost (which depends on the facility usage) is estimated at 15.0% per annum, inclusive of cash premiums, originating issuer discount and JGB’s conversion right."

2) They need to pay down all the debt and not borrow anymore unless they can do so on less punitive terms. According to the latest update this will take 14 months and after this they should be able to finance future growth from the $8m cash flows they generate each year but I'm not holding my breath.

I hoped that having an institution on board would help address these issues but this announcement suggests nothing has changed.