AHF - TAU holding, page-11

TAU is not a stock for the faint hearted. Indeed, it’s not even a stock for those who breathe the air that we breathe. Since 1 January, 100,000 shares have traded and the share price has drifted from 17c, up to 19c (19/1/17), back down to 15c (15/2/17), then to 16c (28/2/17) and more recently, back to 16.5c (17/3/17+). A liquid stock, it is not. A stock that too many watch over, show interest in or are even aware of, it is not. It is however a company with 33.1M shares on issue which gives it a current MC of <$5.5M.

Of the shares on issue, the Top20 hold 86.8% (8/8/16) and of these, the interests of substantial shareholders (ie: Michael Hackett) total 61.4% (ie: ~$3.4M).

As for the business itself, it is not profitable. Hasn’t been (on a consistent basis). KMP payments though have been rather generous, broadly hovering around the 15% mark of revenue. When however employment costs and other expenses(not defined) have been coupled together, the EOX Ratio has been significant, broadly ranging in the 60 - 70+ range since 2008. Indeed, even now, the EOX Ratio continues to uptick from a 5Y average of 63 to a current 3Y average of 71. At H17, it was 132. The following chart reflects this:

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8	Column 9	Column 10
0	Year	Revenue	Net ∏ /Loss	Net Assets	Jun30 SP	KMP Payments	Employ Expenses	Other Exp (not ????)	KMP to Rev	Emp/Oth to Rev
1	F5	3,555,089	2,595,695	21,894,300	68	305,984	860,556	94,232	9	27
2	F6	9,976,488	6,731,773	24,880,837	55	459,869	1,269,447	347,033	5	16
3	F7	3,200,917	1,604,929	26,515,774	60	396,437	1,241,964	91,459	12	42
4	F8	3,685,039	-298,515	26,436,147	42.5	773,184	1,867,131	432,868	21	62
5	F9	4,574,765	466,181	26,873,155	45	488,822	2,301,999	337,543	11	58
6	F10	5,971,086	-1,189,328	20,842,090	34	558,424	3,860,577	482,438	9	73
7	F11	4,469,255	-9,442,150	11,414,127	20	716,198	3,248,280	687,528	16	88
8	F12	4,243,088	-1,599,567	9,827,351	10.5	666,594	2,987,484	451,251	16	81
9	F12 restated	3,727,389	-1,598,416	9,827,351		666,594	2,424,556	324,474	18	74
10	F13	6,433,875	-321,303	9,526,044	10	535,854	2,399,703	252,595	8	41
11	F14	3,798,031	-938,875	8,582,091	7	518,918	2,300,453	451,332	14	73
12	F15	3,698,014	570,567	9,575,276	16	519,690	2,183,401	409,669	14	70
13	F16	3,946,936	-278,079	9,044,728	15	519,349	2,259,793	551,069	13	71
14
15	H17	478,461	-667,958	$8,376,770			483,530	148,996		132
16	F5/16 ave	4,753,074	-174,793	17,117,660		538,277	1,157,726	235,190	11	29
17	Last 5	4,320,849	-513,221	9,311,098		552,081	2,313,581	397,828	13	63
18	Fast 3	3,814,327	-215,462	9,067,365		519,319	2,247,882	470,690	14	71

That said, the significance of all this (quite apart from all the inter-connected family arrangements involved throughout the business, etc) is that the recently announced business restructure and GM still hasn’t occurred, despite having bene announced back in October 2016. Refer, for example to the following ASX announcements /extracts:

31/10/16 è Restructure announced
The Directors of Trustees Australia wish to advise that an Extraordinary General Meeting (EGM) will be convened in December 2016 to seek shareholder approval to implement a significant restructure of the Company to facilitate its growth and improved performance in the future.

It was intended that these changes would be presented to the AGM scheduled for 30 November 2016, however regulatory processes have slightly delayed the process.

The Directors expect to dispatch a notice of EGM and a prospectus to shareholders on 7 November 2016 for a meeting to be convened on 8 December 2016.

22/11/16 è Notice of EGM issued + Queensland Resorts in specie distribution Prospectus issued
Further to the circular letter of 31 October 2016 regarding an anticipated restructure proposal to be considered by Trustees Australia shareholders, I have pleasure in dispatching to you a Notice of Extraordinary Meeting (EGM) for a meeting to be held on 22 December 2016 at the address and time stated in the Notice.

Note

• Prospectus issued +15 days late.
• EGM was to be convened +14 days late.

22/12/16 è EGM adjourned
Trustees Australia Limited advises that following a further review of the documentation provided to shareholders ahead of today’s extraordinary meeting, which identified a technical issue, the resolutions proposed to be considered were not put to the meeting and the Chairman moved that the Meeting be adjourned until Monday 23 January 2017 or a later date to enable correction.

Note

• Prospectus did not identify who acted as the financial, legal or accounting advisers to the issue, etc. No costs in reference to any of these was included in the Prospectus.

The ASX release went on to advise:
The Chairman also advised the Meeting that the prospectus, circulated to shareholders with the Notice of Meeting, in respect of the invitation to vote on the in-specie capital reduction and a public offer to raise $2,000,000 has been withdrawn. All application monies received to date will be returned to subscribers.

23/1/17 è Adjourned EGM date passes by. No meeting held.
No update provided to the market.

28/2/17 è Market update provided as part of H17. Still no EGM happening.
The meeting was adjourned based on advice regarding a technical deficiency in the Notice of Meeting (NOM). In the interim, the proposal to acquire 100% of the share capital in Cashwerkz has been progressed and the directors now propose to convene an EGM to consider both the Queensland Resorts Demerger and the Cashwerkz Acquisition / Merger and related matters.

The H17 report and update went on to say that:
---
The resolutions to be put to the EGM, require shareholders to vote on several important matters that will have a significant change on the structure of the Company and its future if approved and implemented. In respect of the proposed Cashwerkz Acquisition / Merger, shareholders will be asked to approve an issue of greater than 20% of the capital of the Company to the vendor shareholders of Cashwerkz. The Corporation Act at section 611 requires that an independent expert be appointed by the Company to opine whether this is fair and reasonable to existing shareholders of Trustees Australia Limited.

The Independent Expert’s Report is being prepared by Mr. Paul Lom of PKF Australia Limited, and ASIC is required to review the completed report prior to its circulation to Trustees Australia Shareholders with the NOM.

Future progress and timing was also advised, as follows:
---
With the various necessary steps to be taken and expected timeframes, the NOM for the EGM is likely to be distributed to shareholders in late March 2017 for a meeting to be held in late April 2017.

The original NOM and Prospectus did not include any independent accountant’s report, etc.

30/3/17 è No NOM yet issued.
It now seems likely that the EGM will not happen until into May 2017.

The transactions, originally announced in a highly certain form on 31/10/17 have still not happened 5+ months later. By the time that they do occur, the timelines will have stretched >6 months.

So, why such a long passage of time which also seems to be reflective in another associated entity, namely AHF, where the strategic directions review was first announced at the July 2016 EGM and is yet to be provided. It is doubtful however, given all that is happening (or not happening) with TAU, that the AHF strategic directions review for AHF will have any priority over the TAU business structuring /transformation transactions that have been inertia since October 2016. This is despite there being almost a 100% commonality of resourcing, input and control happening as between TAU and AHF (ie: back office, secretarial, accounting, operational, auditing, Chair, common staff on subsidiary entities, etc). It would therefore seem then that until TAU gets its own act sorted that AHF may very well continue to drift in the market, directionless and in want of a relevant purpose, including all the associated impact that this is likely to have on TAU in the future from an associated entity /equity accounting of profit (more likely, loss) perspective.

So, until TAU’s future is sorted, it seems that AHF’s destiny will remain on hold.