Ann: Dividend/Distribution - REF, page-24

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nicleeson

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31/08/18

16:21

Post #: 35333627
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Originally posted by MarsC ↑

Something doesn't make sense to me here. Management commentary seems to indicate that the online contact business is making progress and that it will continue to be pursued.

On the other hand, the special dividend just announced is a return of 100% of cash on the balance sheet to shareholders and would seem tantamount to an admission of defeat, wrt to the contact lense strategy.

But even more concerning (to me), is what I see in the contact lense revenue numbers, which seems to fly in the face of management commentary. Here is what I see:

In FY16 the contact lense business was generating annual revenues of about $1.5 m. In the H1 period of FY17, annual revenues of about $6.1 m were acquired (acquisition of Net Contacts). In the H1 period of FY18, annual revenues of $8.3 m were acquired (acquisition of WebContacts and YourContacts). So pro-forma, and absent any organic growth, the business should now be generating annual revenues of $1.5m + $6.1m + $8.3m = $15.9m. No?

Yet, fast forward to the H2 FY18 period, and annual revenue (in online contacts retailing) was reported at $4.5m. The reported H1 FY18 revenue was $2.0m, meaning H2 FY18 revenues were $2.5m, which crudely annualises to 2 x $2.5m = $5.0m.

Now that looks scarily short of $15.9m. Or am I missing something?

So at current prices you're getting a dividend of 5.5c (or 7.8c pre-tax, if you can utilise the franking credits) - yes. But that's way short of the current share price (9.3c), especially on an after-tax basis. And you are buying a frighteningly bleeding business - as far as I can see. The best value realisation I can see here, is to shut down the contacts strategy and ride what ever is left in the legacy business.

Unless I'm missing something.

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Hi Mars,

I thought the annual revenues they acquired were way less than you posted above in terms of those acquisitions?

Is there a particular ASX release you are getting this from , or in the Annual Report somewhere? Maybe I have looked it up wrong I just did a quick check back on the acquisition announcements and didn't see the revenues acquired of this magnitude?

As to management admitting defeat, I see it maybe defeat in the sense they can't find small bolt on acquisitions at good prices anymore after waiting a long time, so probably makes sense to let shareholders use the franking credits asap.

My disclosure is this is only a very small position now for me as I didn't average down (tried to buy around 5 cents in June but couldn't). Whilst I still hold it is going to get smaller after the div so I haven't been studying up too much on this of late.

Must admit I am a bit surprised to see the shares this high today although it is a small volume stock.

REF Price at posting: 9.7¢ Sentiment: Hold Disclosure: Held
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