Ann: Appendix 4C Commentary, page-18

If so, then it is an amateurish shot which reinforces failure, on their part, to comply with corporate governance guidelines. "Happy cows with full bellies" was not what they were promoting and representing 9 months ago. Mind you, even if we take their comments at face value, does this mean that before Q3, the cows were:
A. not happy;
B. had empty bellies;
C. were not smiling; and /or
D. were not concentrating on milk production?

Any of the above would be an indictment on farm management, as well as executive management. Mind you, we all know who does the farm management here.

To remind us of what the cows are saying, from the Q3/17 CF report:
.....
==> Happy contented cows is always the goal and this year seems to be a good one for the on-farm team.
===> So, last year was a bad one for the cows. is that why so many were sold off for a pittance, put into therapy, or sent off to an off the grid CIA dark prison?

==> The cows on all AHF farms are smiling with full bellies and concentrating on milk production.
===> They should be. After all, in F16 they ate their way through $3.45M in feed costs (AR16, n2c(i)). This is before they munched their way through another $1.5M in feed costs in H17 (H17, n2(c)(ii)). In the last 3 reporting periods, the cows happily munched their way through:
* H16 - $1.03M;
* 2H16 - $2.41M; and
* H17 - $1.5M,
in feed costs notwithstanding all that irrigation, all that pasture and all that rain. Judging by these types of numbers and their appetites, I wouldn't want to see any ravenous cows out there!!!!.

==> These improvements are reflected in the YTD milk production figures, which are encouraging for future years and the value of the farms.
===> So, the cows are property magnates, as well!!!!

==> Milk price changes reflect very quickly in the market prices of dairy cows and dairy farms.
===> Milk prices were previously on the way up (during F14 through F15 and into late C15, yet the AHF controlled property prices kept going down, down, down, not up, up, up. So, why is now considered any different?

==> Fresh Agenda suggesting significantly higher opening prices in the 2017/18 financial year, compared with $5.20 - $5.35 currently and $5.60 before the Murray Goulburn rethink of April 2016.
===> Do you really want to go around antagonising and sniping the opposition? Bad mouthing the other guys is not a good way to flex yourself especially if as a price taker, not as a price setter. But in any event, as a processor, with a wholly internalised milking line, external prices (and whatever they might be) should no longer be considered an issue. Or are they?

==> Prices from $5.20 to $5.35 are currently being paid by the main processors in Victoria, although unpublished spot prices for fresh raw milk are considerably higher as some large processors struggle to fulfil contracted supply commitments of processed dairy products.
===> Does this even matter, particularly if you have your own internalised milk line in place and so considered to be immune to external pricing influences?

The rest of the commentary concerning "unvalued talent" not being expressed in the Balance Sheet etc, is typical folly in as much for its ineptness as its lack of business maturity. The reality is that such apparent talent, skill sets and abilities are in fact expressed in the Balance Sheet. This is because in the F16 accounts, Goodwill of $6.6M was recognised in the Balance Sheet under the heading of Intangible Assets in reference to the CDC acquisition. As n22 of AR16 states:
==> Goodwill is attributable to the significant time and costs to setup and establish the factory and business at Campberdown, including the establishment of the current workforce, management team and brand.
If this isn't reflective of the talent pool to which Skene was referring in his Q3 commentary, then I don't know what is.

Now, back to my favourite topic of Admin & Corporate costs. In AR16, these were put at $924,000 of which:
* Administration costs = $238,709 (F15 = 113,908).
* Professional costs = $468,668 (F15 = 309,308). That's what they call TAU's shared costs charge of $250,000 in F15 and $339,000 in F16 (and higher again, in F17).
* Directors fees = $109,500 (F15 = $74,200), which equated to 40 + 30 + 30 + super.
* CDC acquisition costs = $107,142 (F15 = $0).
* Stapling transaction costs = $0 (F15 = $281,565).

So far, in F17, these costs have been put at $297,000 (H17) against a corresponding Q2/17 CF report value of $511,000 meaning that the figures for directors, etc are all separate. Working this back:
* Administration costs = $162,174 (H17 report).
* Professional costs = $134,888 (H17 report).
* Directors fees = $52,000 (Q2/17 CF report, extrapolated; not reference in H17 report).
* H17 balancing item to match Q2/17 CF report of $511,000 = $161,938.
===> Could this be related to the TAU fee of $169,000 referred to in Q2/17 CF report, or to the $149,000 payment attributed to directors in the same report? Indeed, after proper adjustment, the unexplained difference here is (149 - 25 =) $124,000. And that's for Q2/17 alone.

The figures for the directors therefore did not appear as part of H17,n2c(v).

Stepping this back, then, at H17:
* Admin + professional (above) = $297,000.
* Directors' fees (above) = $52,000 (normalised).
* Directors' fees (extra) = $124,000.
* Other (per Q2/17 CF report) = $38,000
= Q2/17 CF report total of $511,000
+
* Q3/17 CF report Admin + Corporate = $103,000
* Q3/17 CF report - Directors = $115,000
=
best guess estimate of Admin + Corporate expenses through to Q3/17 = $729,000, with a quarter to go, of which the estimates provided to date are:
* Admin + corporate = $301,000
* Directors = $19,000
=
upwards adjustment for F17 Admin + Corporate (in the sense, as explained above) = $1.049M.

So, the reality is that hard Admin + Corporate will likely fall somewhere between $942,000 (based on Post #:24344016) + Directors' payments (27 + 149 + 115 = 291, YTD) = $1.233M and $1.05M (as otherwise explained above). These are current best guess estimates, but what they demonstrate is a very likely CPAD cost for F17 of $1.15M or above, if expressed at the midpoint.

To this, then, one would add in the YTD expensing of the shares in H17 P&L (= $871,000), for an overall CPAD cost in F17 of:
--- low end = $1.92M (rounded to $2M);
--- high end = $2.021M (again, call it $2M, on a rounded basis).

And, all this within a business that has done $20.233m to date in customer receipts and is likely to do $6.1M in Q4/17, for an overall result of $26.3M for the year.
==> Refer to Post #:24344016 from 28/4/17 for further guidance.

That's a broad CPAD cost ratio of >7.6% which is way out of kilter compared to reality, especially if what we are talking about is smiling, happy, contented cows with full bellies!!!

That's my 13.5c worth at this time. At least it will buy me a single share. Just imagine however how many shares the cows could have bought for their $3.45M in F16 feed costs (25.6M shares), or their $1.5M in H17 feed costs (11,111,111 shares).