Ann: Appendix 4E and 2019 Annual Report, page-9

For full disclosure, I have been selling out of some ASH very recently only because there is (what I think) is an incredible opportunity that had a need for investment right now. I have pools of capital and I have a rule that capital that is following a particular strategy (FCF/turnaround) can only be recycled into that particular strategy and that I can't move money from winning strategies to losing ones. After clearly being burnt sellling early on numerous occasions, I have come to accept that I don't know how to sell on valuation grounds, and only sell when I have concerns over the business (or in this case where I had to sell out of KME/ASH and chose to sell ASH). Consequently I have a very weird portfolio, which is almost a de facto growth portfolio (although most of the names were cheap when I acquired them).

That being said, I really like ASH as a business, and I hope to find some cash somewhere to reinvest and add over the next 6 months and I hope it doesn't get away from me.

Pros:
- Ross Shrimpton is heavily aligned and is a great MD
- Chris M is a great CFO
- They have a demonstrated track record of execution since the VET debacle
- There is upside with disciplined acquisitions and with the training business. The majority of the revenue in training came from Aivd in Victoria, who only have one course that is government reimbursed. The majority are actually employer reimbursed, so once there is a good track record of really good vocational training there will be a virtuous cycle of new referrals and also I suspect a solid base of recurring-ish revenue.
- They are creating new services (eg concept permanent)
- From memory one of the leases for one of the defunct VET services expires in the next year or two, and from memory the amount was a fairly substantial kick to the cashflows (maybe 100-200K- maybe someone else could double check).

Cons:
- it is a cyclical industry and there are massive external forces outside control. The best recruitment business that I have seen is MAN (US listed) and I think the best scenario for ASH is lumpy growth that MAN has achieved. As an aside, Ashley is doing a much better job than the Australian division of manpower group.
- I am terrified of Uber's recently announced Job matching service. It won't get anywhere for 12-18 months (they have only just launched in Chicago and I think it will be some time before it launches here). In practicality, I think RS and team will navigate it very well when it comes, but there is a chance that it does come, that some of the lower skilled labour revenue will be more challenging. Nevertheless something worth keeping an eye on.

FInally, I think if the acquisition goes through, there should be an immediate 20-30% lift in the share price.

Overall, I think there is very limited downside risk. With what we know from Q1 it is looking highly likely that at least last years earnings will be reached, and I suspect they will be beaten by at least 10%. The upside scenario may be 50%+ (if acquisitions go through). Biggest downside is probably external factors and uncertainty- but when RS and his family own so much, there is noone more interested in making the decisions that are right for shareholders.