$1 on the card-no, page-53

Hi AgentSmith82

In simple all information is available in Annual and Financial Reports from the past ten years. It is worth spending time reading these to see where the company has been and highlight strengths along with weaknesses.

Summarising the previous post's point, CDD had been acquiring revenues and the following financial years they were unable to realise it. For example, in 2013-12 they acquired 7 companies with revenue of $282.28 Million, yet revenue grew only $114 Million the following full financial year, where did the other $168 Million go? The same was for EBITDA, they acquired $44.856 Million in EBITDA, yet the full following financial year it increased by $3.7 Million only.

Either they have been acquiring some dud companies or their existing business was continuing to fail. Margins across CDD's markets aren't getting better by reading Annual Reports from other similar companies, here or overseas. There was no mention in any of the Annual Reports from 2008 of any difficulties in operating markets or an honest/open explanation of these serious decreases in revenues or EBITDA. Their performance has been masked by acquisitions and management spin of results. This raises serious risks for me and smells of something wrong within the organisation.

Why is this company trading whilst insolvent? Poorly performing companies that do not change as a result of poor financial performance always become uncompetitive in their markets and will lose significant market share, leading to insolvent trading. It has taken CDD management eight years to see the writing on the wall with the completion of the strategic review. While action is being taken now, the fact they haven't implemented the full advice of the review indicates the full reality of the position of this company has not been realised.

An early sign of insolvency is with the amount of Capital Raisings they are making. This is my main indicator of identifying risky company insolvency. Hastie Management were forced into liquidation when major shareholders were unwilling to give the company more money via capital raisings. Further back ERG had failed to raise capital and the major shareholder offered a full takeover of the company upon it crashing to significant lows compared to its 2000 peak price.

While CDD have the luxury of a large benefactor in Crescent Capital and the willingness to fund ongoing negative cashflow at the moment, the timing will be dependent upon how long Crescent or Crescent's bankers/investors are willing to underwrite capital losses in CDD. Something will give somewhere, likely when CDD share price sinks to below 20 cents or lower. When will this limited tap dry up?

While I don't have or never have had a position in this company, I just hope current investors don't lose significant sums of money or bet their house on an improvement just because the share price is low compared to the $7+ share price from 2-3 years ago. It will take more than luck to turn CDD around and believe it is early days yet. Firstly they have to prove stability of cash flow with no more capital raisings for at least one financial year, then they will have to begin a program of office and employee rationalisation to right size to current earnings. No more restructuring will be an indication of things turning around.

Also remember the above is in my opinion, do your own research.

Best of Luck
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