This, I agree with. Equally, with Flahey's, it is not an established business /formulation, but rather a new business /formulation (just hitting the market). So, there will be an added, obvious, extra cost here for marketing, distribution, scaling up, etc.
This, from ASX 28/8:
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Australian Dairy Farms Group Limited (ASX code: AHF) will acquire Flahey’s Nutritionals Pty Ltd, owners of Flahey’s Future, a certified-organic formula containing essential vitamins, minerals, protein, carbohydrates fats and pre-biotic fibre.
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Flahey’s Future is new to the Australian market and is progressively being rolled out nationwide through a range of major branded retailers in the Australian pharmacy market including Chemist Warehouse, Chemist Outlet, Blooms the Chemist, Priceline, Soul Pattinson and Pharmacist Advice stores.
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The acquisition includes stock necessary for ongoing trade and Flahey’s Nutritionals’ intellectual property for the rollout of an extensive range of infant formula products.
No matter what, the $1.5M payment is a significant amount for an, as yet, immature product to the market (ie: not yest established in the market) which will be blended offshore (in NZ) and which will then be sold at mark-up to manfactured or landed cost, as opposed to largely sourced or styled organically from within.
The real cost of acquisition however is higher than this as "Chris Flahey will join the Australian Dairy Farms as Sales and Marketing Director responsible for the execution and transition to a fully branded business."
So, its $1.5M + an ongoing job (at circa, minimum $300,000+, my estimate) + based in Sydney (unless if Flahey relocates to Camperdown so, further overhead costs of circa, minimum $100,000+, per annum HR wise and circa, minimum $100,000+ non-HR wise, plus added extras such as super, payroll tax, leave allowances, Workcover, etc = +30% on top of any direct payroll commitment).
That's potentially a further +$120,000 if Sydney based, or $90,000 if Camperdown based with nil added extra staff. So, the broader recurring cost varies between:
* +$620,000, if in Sydney; or
* +$390,000, if in Camperdown.
Either way, that's a significant recurring cost, going forward for what is a new business line, right at the very beginning of its rollout /market acceptance plan.
Yesterday's presentation reinforces this position with, amongst other things, the following stated:
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"Acquisition of Flahey's Nutritionals is our most recent step
• Flahey's Nutritionals recently launched into the Australian Certified Organic market via a specialised ultra premium product currently ranged in major branded retailers within the Pharmacy market in Australia."
Again, a broader retail rollout via the supermarket sector is quite unlikely, both for reasons associated with:
* the Company's past (here, I would have preferred to have seen AHF buy the business undertaking /activities and IP rather than the Company and its inherited /past history); and
* with the pharmacy sector emphasis (as opposed to retail sector stream) set out in both announcements - of 28/8 and 6/9.
Beyond this, yesterday's presentation adds little to the equation in reference to:
* financials;
* forecasts;
* dedicated business prospects;
* real time date commitments, etc.
That's the negative side of things but then again, the provision of such information often tends to be reserved for when the CR /prospectus raisings are actually issued. In this regard, Hackett's resignation from Jimmy and his recent machinations over at TAU (both of which are time stamped to within the past <2 weeks) point to some cleaning up being done. Often, this is also reflective of things to come (ie: a potential CR /capital management initiative being undertaken, etc).
As for the positive side of the equation, the comments attributed to the organic space are nothing new as these have now been repeated several times over by AHF without any real additional content being provided. However:
1.
the fact that the presentation was made at all, is new and represents the first formative baby steps taken in trying to connect with a wider investment sector (albeit without the benefit of any underlying broker coverage which largely went by the wayside shortly following the CDC acquisition); and
2.
the new site details albeit, still at a very high level (pages 22-24) are both new and reflective of some further thinking being done in the area although the high level plans of ASX 6/9 are somewhat different to what was being suggested earlier in ASX 19/12/16.
So, from a presentation /engagement perspective, yesterday's announcement had a bit of everything in it - neutral, to new, to unknown, to yet to be known, to firming up of details to be provided, etc. It was in the right direction, if however, as a first step only with much more work yet /still to be done. Much more detail though is likely to be forthcoming once the CR program is under way. For now, its like doing a quick makeover, like on some of TV's housing reno shows.
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