Hi Rookstar, no, you are not seeing it wrong. The soundness of the business is there but this is being challenged by the behaviour (whether lexical, deliberate or devious) of the Board.
Management (especially shared and seconded management) are not all there - how can they be? They are remotely located in running a SW Victorian business from the heart of Brisbane's CBD. Even their auditors, insurers and legal work is done from out of Brisbane.
You will see from my comments that I am homing in on matters of governance, transparency, disclosure, dependency (by TAU on AHF), strategic insight (even when viewed through the shrouds of opaqueness), financial returns and profitability.
To capture this in a nutshell:
1. Every farm acquired (including with resulting CAPEX added in) is now valued at below their original acquisition prices (except for one property that was acquired via sale by mortgagee in possession).
2. The CDC acquisition price has been questioned although this is yet to be tested.
3. After 12 months of performance (circa 15/4/16), CDC has yet to deliver up against the ENITDA and EBIT margins that MH was crowing about (with conviction, but now without substance) back in February 2016.
4. Almost 100% of the CAPEX (~$2M+) spent to date has effectively been lost (ie: no incremental, beneficial gains have since resulted). Indeed, all farm input costs are up substantially, not down. So, was the CAOEX actually really spent? If so, where? If not, what then was it spent on?
5. Milk prices have collapsed externally (although they are now on the rebound) yet the raw milk supplies into CDC actually seem to be costing more. How is this when supplies have been internalised?
6. Product margins have fallen, not yet risen. This is either due to reduced capacity utilisation, lower throughout or questionable production choices.
7. Various announcements have been made over the last 12 months but none of them have yet progressed. Just how hard is it to but a piece of industrial land? After all, they have put in place a completely separate corporate structure for this, yet for no apparent benefit.
8. The strategic announcements to date have all been designed to confuse, obfuscate and distract shareholders from really understanding what is going on in respect of the business.
9. The financial disclosures at the 2016 AGM were a big mistake. They gave an inside glimpse into the secret, shadowy world of the business when it should not have. This is especially so when the financials, by the month, were very tightly aligned /correlated to the Q1/17 CF statement, so therefore quite robust as a working /recurring base. Problem is, now, this same base can be used to measure ongoing /future performance, something which I suspect MH now regrets.
10. The cattle have been sold off at a serious loss despite there being good prices obtained. So either, they've been selling duds, or had previously, deliberately overstated the FV of the herd. So, what is it that is not being said here?
11. And don't get me started about the strategic plan /direction, now >10 months in waiting and still counting. This has been a competency mess of their own making, or was it?
12. If TAU is any example to work by, Michael's strength has never been in leading a publicly listed company, or in being accountable for same. After all, how many shares were issued last year on the convertible notes conversion? This is not a trick question. You need to think it through and see exactly what elements went into making up the conversion.
13. At the time, the separate references to 15% recurring placement, and special 10% added placement approval were designed to obfuscate, distract and lead "punters" elsewhere. This is even more so if, for example, their mid 2016 comment of a strategic plan being provided by end of 17 is anything to go by. One does not option 25% of the Company without having a plan already in place. So, was the plan and the proffering of the placement choices real, imaginary or illusory?
There really does seem to be an ongoing crisis in "good" governance existing out there. It's not just with AHF, but with others as well. Trouble is, with AHF the resulting transparency is almost 100% opaque.
The Company and its business prospects are good but not for, because of or due to, any of the efforts of the Board, its executive management and its executive /Board shareholders.
With now the lowest share price on record (post IPO resumption), it's quite clear that Michael, Adrian and the Board are not sufficiently experienced, engaged or competent enough in order to take a baseline (even, good) business and make it into something greater than this.
The building blocks are there. The competencies are not. That's a pity because opportunity does indeed genuinely beckon for this Company, just not with, through, via, because of, or due to, this Board.
Consider this, in<6 months, Adrian has gone from doing media pieces, commenting to shareholders and being associated with press releases, to being absent, invisible and not all together there, in function, performance or engagement with shareholders.
So, AHF is another example in how good governance done badly can risk compromising a company altogether rather than in powering it to success. Pity then that, day after day, AHF increasingly starts looking like it's birth parent, TAU.
Is then history repeating itself? I would suggest, no, but with everything that is going on, it's hard to remain convinced of this. Michael could well have released the Q3/17 CF statement anyone after the 20th yet waited until after market close on 28/4. That's not being instinctive, insightful, or genius. That's being concealing, evading of scrutiny and a distraction in trying to connect the various dots. Again, for a $25-30M revenue based company, that is bad, not good, governance and woeful disclosure.
So, to answer your question - a good company with some solid foundations in place, but with woeful governance, inept management and a total lack of shareholder, business and corporate engagement, disclosure or interest.
As surely then as night follows day, a SECOND STRIKE beckons, just as Michael himself will be coming up for re-election (or indeed any hand picked replacement that he might proffer in the interim). To put it bluntly - this would be considered by many to be a good thing, not a bad thing.
So, what will Q4 produce? More of the same or upward surprises? It should be the latter, but the Board keeps dragging the business back to the former. That's their problem to fix, or their legacy to forever be branded with.
Good things can and will happen for this Company, just not under, through or with this Board remaining in place. They have already demonstrated what they are not capable of producing. Soon, they will likely realise this as well. Pity if they leave it till then because it won't end happily for them.
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