Australia's largest stock trading and investment forum Australia's #1 stock forum

AHF

Click for more information

0.00%

4.5¢ australian dairy nutritionals limited

Thanks grant I still seem to think that opportunity knocks at...

First 23 Last

rookstar

1,450 Posts.

27

29/04/17

12:13

Post #: 24353580

Originally posted by Grant62 ↑

++++ second time lucky +++++

Some of this can be considered as seasonal movement but a lot of it can be explained by inept management, a lack of depth, knowledge or understanding of the industry or of the business that they are operating in, and a continuing remoteness in connection from Brisbane to Camperdown (it may as well be London based for all the care or attention to detail, except in loading up the costs).

Theoretically, Q4 customer receipts should be $6.7M on a straight line extrapolation, but on an assessed /ratio determined basis, are more likely to come in at a much lower $6.05M. The effect of this is that instead of Q4/17 generating $350K+ in operating cash flow, it is likely to draw a further operating loss of $300,000. The effect of all this is that year end cash could easily end up falling below $1.1M or indeed to as low as $1.0M absent there being a serious Q4 seasonal kick which, at this stage, seems unlikely (judging by their experience, attention to detail and mastery of the business).

What is intriguing this time round however is yet another little devious twist in the equation involving payments to directors (item 6.1). For example:

Column 1 Column 2 Column 3 Column 4

1 Item

2 Payments to Directors

3 Payments to TAU

4 Notes

5 Q1

6 27,000

7

8 6.1

9 Q2

10 149,000

11 169,000

12 6.1, 7.1

13 Q3

14 115,000

15

16 6.1

17 YTD

18 291,000

19 169,000

20

Given that there are only 2 directors, part from Skene as the CEO /executive director, the Board should not be costing anywhere near this much. More the point, in F16, Hackett was paid $43,800 (including super), and each or Rowley and Jackson $32,850 (ditto). The total therefore should have been $109,500 or ~$27,000 on a quarterly basis. This was then what was paid during Q1. So, what did the payments of Q2 and Q3 relate to, as nothing more than this had been approved by the Company?

There is some explaining that needs to be done here because, all things considered, Jackson would have been paid out by end November, so the Q2 outcome should have been ~$24,700 (all things considered – KJ for 2 months, Adrian and Michael for whole of quarter). Q3 however should have been $19,200. So, what did the other $124,000 paid in Q2 relate to, and the other $96,000 in Q3?

Some strange figures indeed, but I digress.

Instead of further considering the above, the following is a quick 9and arguably damning) assessment of the Q3/17 CF statement which once again was signed by Michael. Pity however the accuracy of the projections being proffered.

There is much to be said about this, but just not with the current Board or Management at the helm.

Consider this (based on the CF reports of F17 YTD):

Column 1 Column 2 Column 3 Column 4 Column 5

1 ACTUAL POSITION (CFS STATED)

2 Act

3 Act

4 Act

5 Act

6 Item

7 Q1

8 Q2

9 Q3

10 YTD

11 RECEIPTS

12 7,782

13 7,280

14 5,169

15 20,231

16 - Customer receipts
- Interest

17 7,779
3

18 7,277
3

19 5,167
2

20 20,223
8

21 PAYMENTS

22 7,738

23 6,857

24 5,200

25 19,786

26 - R&D
- Manufacturing & operating
- Advertising & marketing
- Leased assets
- Staff costs
- Admin & corporate
- Other

27 0
6,477
2
4
1,084
171

28 0
5,405
3
4
1,105
340
0

29 0
4,019
9
4
1,065
103
0

30 0
15,903
14
12
3,254
613
0

31 - Interest paid

32 121

33 112

34 121

35 354

36 NET PAYMENTS

37 7,859

38 6,969

39 5,321

40 20,140

41 NET OPERATING CASH

42 -77

43 311

44 -152

45 81

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6

1 PROJECTED POSITION (CFS ADVISED)

2 Act

3 Proj

4 Proj

5 Proj

6 Proj

7 Item

8 Q1

9 Q2

10 Q3

11 Q4

12 F17

13 RECEIPTS

14 7,782

15

16

17

18

19 - Customer receipts
- Interest

20 7,779
3

21

22

23

24

25 PAYMENTS

26 7,738

27 7,033

28 7,507

29 6,231

30 28,509

31 - R&D
- Manufacturing & operating
- Advertising & marketing
- Leased assets
- Staff costs
- Admin & corporate
- Other

32 0
6,477
2
4
1,084
171
0

33 0
5,681
2
4
1,035
130
131

34 0
5,932
3
4
1,112
340
116

35 0
4,713
7
4
1,085
301
121

36 0
22,803
14
16
4,316
942
368

37 - Interest paid

38 121

39 112

40 121

41 121

42 475

43 NET PAYMENTS

44 7,859

45 7,145

46 7,628

47 6,352

48 28,984

49 NET OPERATING CASH

50 -77

51

52

53

54

Column 1 Column 2 Column 3

1 VARIANCE – PROJECTED TO ACTUAL

2 Var AC/PJ

3 Var AC/PJ

4 Item

5 Q2

6 Q3

7 RECEIPTS

8

9

10 - Customer receipts
- Interest

11

12

13 PAYMENTS

14 -126

15 -2,307

16 - R&D
- Manufacturing & operating
- Advertising & marketing
- Leased assets
- Staff costs
- Admin & corporate
- Other

17 0
-276
1
0
70
210
-131

18 0
-1,913
6
0
-47
-237
-116

19 - Interest paid

20 -9

21 9

22 NET PAYMENTS

23 -135

24 -2,298

RATIOS

Receipts to Manufacturing /Operating Costs

Column 1 Column 2 Column 3 Column 4 Column 5

1

2 Customer Receipts

3 Manufacturing Costs

4 C/M Ratio

5 Comment

6 Q1*

7 7,779

8 6,477

9 1.20

10

11 Q2*

12 7,277

13 5,405

14 1.35

15

16 Q3*

17 5,167

18 4,019

19 1.29

20

21 YTD*

22 20,223

23 15,903

24 1.27

25

26 Q4e

27 5,985

28 4,713

29 1.27

30 YTD C/M Ratio applied

31 F17e

32 26,208

33 20,616

34 1.27

35 Estimated

Receipts to Manufacturing /Operating Costs + Staff Costs

Column 1 Column 2 Column 3 Column 4 Column 5

1

2 Customer Receipts

3 Manufacturing /Staff Costs

4 C/MS Ratio

5 Comment

6 Q1*

7 7,779

8 7,561

9 1.029

10

11 Q2*

12 7,277

13 6,510

14 1.118

15

16 Q3*

17 5,167

18 5,084

19 1.016

20

21 YTD*

22 20,223

23 19,155

24 1.056

25

26 Q4e

27 6,113

28 5,798

29 1.056

30 YTD C/MS Ratio applied

31 F17e

32 26,336

33 24,953

34 1.056

35 Estimated

Based on these two ratios, AHF is likely to generated Q4/17 customer receipts of between $5.985M and $6.113M, or at the midpoint à $6.05M.

Against this, Hackett has projected that AHF will have Q4 cash payments of $6.231M + interest of $121K (projected), for a total operating payments commitment of $6.352M (rounded to $6.35M).

This suggests that the Q4/17 OPERATING CASHFLOW will be –ve $300,000 for the quarter, all things being equal, and absent any variation to the above.

Within this context, there is actually not all that much that they can say or suggest.

They haven’t got a clue about how to estimate or project future costings.

They have apparently been spooked out of trying to rip more money out through the ADMIN /CORPORATE expense account (err – line of entry).

The Business has now shown QoQ customer receipt reductions since the beginning of F17, with Q1 at $7.8M, Q2 at $7.3M and Q3 at $5.2M. Very likely, the Q3 receipts reduction has something to do with the likely internalisation of milk flows but even if this is so, it hasn’t shown up elsewhere in the equation, such as in the CMS Ratio which collapsed to its lowest point so far during F17, whilst the CM Ratio retreated from its Q2 highs although was still above the Q1 result.

It is also fairly clear from this that they are back to a break even proposition at best and arguably, right at this moment, going into May, they are in a loss making situation. There is little therefore that any strategic plan or direction which incidentally was not issued today, nor for that matter was any commentary usually associated with the quarterly cash flow releases. AHF has the business but does not have the business mindedness with which to either compete within the elevated food and lifestyle sector, or in the retail grocery segment of the market. Equally, forget about China or anything similar to this. Michael /TAU cannot even get an expert’s report under way, a NOM completed and a resumed XGM convened in order to undertake and complete his transformational overhaul of TAU. So, if TAU can’t do it there, then its doubtless that they can’t do it with AHF. In essence, competency is not one of the KPI measurements that is being complied with.

AHF’s position is also such that it cannot now actually begin its own evolutionary journey without there being significant capital raisings and hence dilution of Michael’s interests in the Company. Neither he nor TAU can stump up the funds necessary to take AHF to the next level. Nor for that matter is effective cost control being either managed or ensured. AHF is therefore at risk of being entirely directionless going forward with captains at the helm who, instead of driving this forward, have actually turned it in towards the rocky shoals ahead.

As an evolved business, AHF should be generating a minimum 10-15% margin on its products yet it is not doing this and everything that management and the board either says or suggests is in the nature of pure puffery without any hint of soundness, accuracy or correctness. According to the press announcements, the JVs are plenty and numerous yet they haven’t even been able to finalise on the purchase of the Camperdown lands that they referenced back in November. If they had, then shares would have been issued by now (after all, shares were to form part of the consideration) and the acquisition would have shown up in as part of the INVESTING CASH FLOW. It didn’t, so they haven’t. Even a residential property typically settles from go to whoa within 90 days yet here we have had 130 days pass by since the Camperdown land acquisition announced was first made on 19/12/16. Before long, it will be a year on form this – heaven forbid.

More significantly than this however is that Michael and the Board (which is barely there in terms of it being genuinely independent according to the ASX issued Corporate Governance Guidelines) are at risk of missing their second TSR strike opportunity. The first has already expired given that the required 31/12/16 SP of 23c was not reached. Now, the 30/6/17 TSR strike price requirement. For purposes of considering this, the relevant TSR starting price was the 5 day VWAP immediately prior to the commencement of the relevant measurement period. Given that each of the baseline measurement dates revert to a zero date of 1/7/16, then the 5D/VWAP (or similar) to this was, as a starting point, 18c.

With the Jun30/17 SP requirement being +30%, this would require the SP (given that no dividends have or will be paid), to be >23.4c at the end of the relevant measurement period. In effect, this would require a 67% appreciation from the current SP and then some. With then the resulting XP being 25c, the real effective required “got to” position is arguably +25% (as a buffer), so, from 27.5c to above. To get to there, however, would require a virtual 96% SP improvement over the next two months. Doubtless, the Company (and its board and guiding management( might be able to break bread but they will not make (and are incapable of making) wine out of water.

The Board therefore is in the rather invidious position of facing up to an increasingly hostile shareholder force, an underperforming business and share price, and very likely increased scrutiny of all the costs that seem to have been ripped out of the business over the last 18+ months (all in the name of OPEX, transfer prices, share of costs, etc). It is however quite simple. If the business is not generating a profit, then Michael & Co should not be routinely, regularly and repeatedly charging >$350,000 in share of expenses /overheads to the Company. Nor for that matter should the Company have issued the KPI shares as these have so far failed dismally in driving the business forward or in making it better.

Causing the Company to book (even if done as a non-cash expense) an amount of $871,000 on account of issuing of the performance options to senior management was a travesty, as well as an abuse of shareholder interests. In effect, what has been generated to date has been a loss of MC and MV of >25% relative to Jun16, but in return however for a cost to the Company, to profit and to shareholders of $871,000.

However, far from this being the “one off” that Michael stated in the H17 report, it is likely that the both the exercise and the costs involved will be repeated again, particularly given that there are a further 9.36M unvested options presently sitting out there. Perhaps Michael and the Board can convince us that this has already been taken care of through the “one off” costs that were booked at H17 but given all the financial engineering involved here, it is actually quite hard to fathom whether this is actually so or not. Perhaps the Board would care to explain this further? In this regard, there is at least a further $285,000 in unamortised costs that are yet to be brought to account through the P&L.

Putting this all into context, the Board and its foray into manufacturing has so far proved to be a very expensive option to the Company and its shareholders but a very lucrative one to management, the Board and to the executive shareholder. Doubtless they will want this to continue, but very likely, within the next 6 months, it will all come crashing down.

To not put too fine a point on it:

STRIKE ONE has already occurred and STRIKE TWO beckons. It won’t take too many more reports like today’s (with inert management) in order for shareholders to completely rally against the Board; and

OPPORTUNITY KNOCKS, as the director facing re-election this year is none other than Michael himself.

Talk about letting the hounds out. It’s already rapidly nearing the next full moon and the dogs, they are baying.

Expand

Thanks grant
I still seem to think that opportunity knocks at the moment for this company, despite the current board or there lack of, am I looking at this all wrong?

AHF Price at posting: 14.0¢ Sentiment: Buy Disclosure: Held

0 Great analysis

Top Stories

MIN

MinRes's Ellison knows he screwed up – for that reason, hunt for new Chair to be sped up

History-making uranium sample grades and an imminent drill run. Infini Resources is poised to transform in 2025

ACW

This biotech stock raised $11M in a risk-off environment. Its Alzheimer's drug could change the game

Breaking news: New opportunities for investors & companies - HotCopper opens to capital raising!

WC8

Pan Asia rebranding to 'clear confusion' after bagging $35M for Chile projects

There are more pages in this discussion • 56 more messages in this thread...

First 23 Last

Add AHF (ASX) to my watchlist

(20min delay)
Last 4.5¢		Change 0.000(0.00%)		Mkt cap ! $12.63M

Open	High	Low	Value	Volume
0.0¢	0.0¢	0.0¢	$0	0

Buyers (Bids)

No.	Vol.	Price($)
3	107214	4.5¢

Sellers (Offers)

Price($)	Vol.	No.
4.6¢	133709	2

View Market Depth

No.	Vol.	Price($)
10	740876	0.125
10	545141	0.120
4	362511	0.115
7	208000	0.110
1	25000	0.100

Price($)	Vol.	No.
0.130	88114	3
0.135	253636	8
0.140	460127	9
0.145	165385	2
0.150	157451	5

Last trade - 07.02am 04/12/2024 (20 minute delay)

AHF (ASX) Chart

Day chart unavailable