10% gross dividend coming, page-11

The Balance sheet is just not what i would call overly strong. When considering debt to equity allowance needs to also be made for the Deferred vendor payments of 21m due in August and September this year. (Progress Pacific 7.6m, Capiotech 13.1m)

After reviewing this previously a portion of these settlements can be in script, the cash portion will be paid from raising more debt. I say this as the cash balance at the end of December was minimal and the stronger cashflow from this half will be required to fund sus. Capex and rebuild the bank balance.

So i believe debt to equity will be closer to 35-40 % post September. This level of debt is still very servicable if you consider net receipts minus tax divided by interest.

I have come to the conclusion that the best sort of intangible asset is the one that doesn't appear on the Balance sheet - i am referring to economic goodwill ( an intangible quality that gives a business a durable competitive advantage) as opposed to accounting goodwill which is often little more than a place to locate over payment for acquisition.

ASG has persued growth via acquisition which possibly indicates its business model isn't sufficiently strong to drive organic growth. The intangibles will only become an issue if Revenue stalls and impairment testing results in writedowns that affect banking covenants over the debt. Unless this occurs the intangibles are of no consequence, apart from being a component of a weaker than desirable balance.

From memory the data centre wasn't projected to bring significant revenue - i recall 40m over 10 years. Still its a key component of building their cloud strategy.

I am ultimately undecided on ASG, the next 6 months should offer some more clarity. While projects are being delayed we won't know whether the acquistions have delivered on skill sets required to deliver real organic growth, or just inflated the balance sheet with intangibles and higher levels of debt.








Progress Pacific September 2012 7.6m , Capiotech