Ann: Appendix 4E and 30 June 2017 Annual Report, page-20

For its minuscule size, this company has one of the most fluid and complex revenue models, and its cost base flexes up and down all the time, making the P&L almost impossible to decipher on a steady state basis.

Meaning that when the company reports "Net Profit of X million dollars", it is difficult to know what that number really means.  

However, the thing that appeals to me about this business is its free cash flow generation (and even that is difficult to nail down given the wild swings in the requirement to invest in IP platforms and systems).

Over the past 4 years, a period that has required a significant investment in business transformation, the company generated a cumulative total attributable Fee Cash Flow equivalent to some $6.0m, of which around one-quarter has been returned to shareholders as dividends, and the remainder has been applied to taking the company from a ~$3.5m net debt position in 2013, to a net cash position of ~$1.0m today.

So, FCF running somewhere between $1.5mpa and $2.0mpa is meaningful in the context of a company with an Enterprise Value of a mere $13.5m.

Like someone implied on these threads, the succession planning in this family-run company had also raised some questions in my mind because, as it is, this company had, for a long time, struggled to gain any sustainable earnings traction, until a few years ago.

The jury is still not totally in with regards to this issue, but the past few results (to the extent that I can discern the levers that they are pulling), suggests to me that the business is on the best footing that it has been for many years.

While I sense that most of the execution risks in terms of transitioning from a direct seller of a service to a franchisor have been ameliorated, this is still not a business in which I would be happy to venture more than just a few percent of my investable capital, even if liquidity in the stock allowed it.

For starters, one major lingering concern I have is around what is happening in the Australasian segment, where Revenues have been undergoing an alarming fall for several successive financial periods, with no explanatory commentary to be found in any company release.

Australasian Revenues ($m, % change in pcp shown in parentheses):
DH2011: 1.23  (-5%)
JH2012:  2.57  (+124%)
DH2012: 2.12  (+72%)
JH2013:  3.53  (+37%)
DH2013:  3.69  (+74%)
JH2014:  4.54   (+29%)
DH2014:  5.42  (+47%)
JH2015:   4.15  (-9%)
DH2015:  5.00  (-8%)
JH2016:  3.79  (-9%)
DH2016:  3.93  (-21%)
JH2017: 3.42   (-9%)

If anyone is able to volunteer a plausible reason for this unfavourable trend, before I contact the company for an explanation, that would be appreciated,