Got sick of seeing the constant decline in the share price so...

Got sick of seeing the constant decline in the share price so sent an email with a few questions to GFY.

Here is my questions:

"Dear Bernie

Like most shareholders I am becoming increasingly concerned with the continuing decline in the companies share price over the past 9 months. At the AGM it was stated that the company was experiencing competitive trading conditions yet still expected to report a NPAT for 2016 similar to that of 2015. As it stands at the current share price GFY now trades on a yield and PE basis amongst the cheapest shares on the ASX. Clearly the market does not believe that 2016 results will be anything near those of 2015.

I have attached a simple spreadsheet calculation of where 2016 results might end based on a few assumptions these being:

1. Static sales
2. No deterioration in margins
3. No repeat of IPO costs and retention bonuses
4. Full tax paid

Would you be kind enough to look at this and advise if there is any major error in my assumptions. I am unsure what the tax position will be but see that 4,792 of tax losses are still available.

Could you also advise if the company anticipates paying a dividend of 12.8cps for the year and whether an interim dividend is proposed as well as expected franking

Any additional information would of course be most welcome.

I am not attaching the spreadsheet but basically it showed static sales and margins with an add back of the one off IPO costs and retention bonus. I took a full rate of tax and the end result was a profit a few million down on last year which would still make GFY super cheap at current prices. As you will see from the response there will not be much tax paid this year. I hold my view that GFY has been way oversold.

The response:

As you would be aware, I have to communicate with shareholders very carefully, so as to ensure that everyone has a similar access to information. There are a few comments that I can make, which fall within the rules.
- 2015 NPAT was, in fact, $12.9 mill
- Godfreys will receive a tax benefit over the next 12 months, that is not reflected in proforma numbers. Thus, we will not be paying full tax rate.
- Due to low tax rate, franking rate of 30% applied to last dividend. You can expect a similar franking rate for next 12 months
- Last dividend of 12.9 cents was a half year dividend, only.
- Although the Board will make all decisions on dividend, you should assume that an interim dividend will be declared.
- I can’t pass comment on accuracy of your worksheet. However, I can say that it is pretty simplistic and a conservative view.