Ann: Appendix 4E - Preliminary Final Report, page-36

This is really for @caketin - I thought I would review this more deeply as this is on my watchlist.

Herewith my thoughts and views:

1. When you invest you largely invest in management, no business is immune to0 their influence.
2. The discontinued operations numbers are strange, to say the least - The turnover and margins look in line with 2018. So really the expenses are the issue. Who after a bad 2018 allows administration costs to go from $9million to $12.8 million. Sorry but that is just plain bad management. Why was this situation not managed on a monthly basis - it's not like it suddenly happened it lost money in the year to June 2018. The income tax benefit applied is way over the normal tax rate as well.
3. At the EBITDA level, the business performed exactly as outlined at the half-year freakily they made $14 million Ebitda for the continuing business in each half. They missed the $240m top line by $4million as projected at the half-year.
4. The hard issues are the value of the write-offs - $23 million on discontinued ops, Software write-off of $2,4 million and a growing interest expense that actually more than doubled from $2.1 million to $5.9 million. That after they cash-up the business with a lot of money and (according to my records) didn't spend as much as they had in the budget.
5. The scary thing in the income statement is that the same issue that I noted for discontinued ops I note here. The previous years' administration costs were $28.7 million on $117m turnover. This year the turnover goes to $236m and if the ratio stayed the same the cost should have gone up to $58 million they are a staggering $70.1 m. Normally this could be explained in a margin increase but in fact, it dropped from 41% to just over 40%. There was a clue in the half-year results (they don't lump them together there) but the Employee and consultant costs had gone from $7.6million to $21.7million.
6. This business outlined its EBITDA forecast at half-year and hit the target but interest, depreciation etc all blew out so that after the acquisition its made only 63% of what it made in 2018 for continuing operations. So what happened to these accretive acquisitions? where did it all go wrong...
7. You do realise that by having a whole lot more shares you do reduce EPS when you are making money but you also reduce the loss per share when you are not. Its ironic isn't it.

My original concerns about whether the new management team could fit into the lean mean culture of an independent are not evidenced in these numbers and my concern still exists. I see no evidence of cost management here - Need a new software platform so write off $2.4 million - let's just get a new one ... From my meetings before the one they were installing was providing far more information than the existing ones in those businesses.

So we should not be surprised by the numbers but my concerns still exist this "roll-up" is just churning at the moment and right now you are getting diminishing returns and rationalisation but no benefits. It may even be going backwards in some areas.

By the way, I loved all the strategic slides and presentation it looked really good, sorry that the numbers let it down. It's still on my watch list but my concerns are even larger now.