Ann: 2023 AGM Company Update Presentation, page-11

A couple of years ago when the price was above 40c, AFL was priced as a growth stock with a disruptor business model, acquiring local, smaller, less efficient law practices and gaining economies of scale, introducing efficiencies as well as winning clients with an innovative digital strategy. It was at the tipping point of becoming profitable.

But things started to go wrong as focus on the operation was lost and key staff lacked alignment, to say the least.

Now the market seems to be valuing AFL as an ex-growth value stock. With the CEO bonus based on eps of 3c for FY24, the market is valuing at P/E of 5 or 6 right now, if the target is assumed to be met. I read the vibe at the last presentation Q&A that this should be achieved. I hope they may be under-promising and will over-deliver, would be a good sign if they do.

With one year stabilisation and profit under their belt, I am sure they will then use the financial headroom they already have from the bank to get back into acquisition mode. They will only start doing this, I think, before YE in June if they are sure of achieving the 3c, otherwise costs incurred but no revenue in the current financial year.

At the when point they go back into growth with acquisitions and also show solid organic LFL growth they should get re-rated by the market as a growth stock. Buying at the start of the next financial year makes sense as there is then a full year of revenue, if a key measure continues to be calendarised eps.

Right now we still have a lot of investors who bought much higher for the growth and promises and are sitting on losses, growth investors who didn't intend to buy a value stock, and some will be moving elsewhere.

The key is whether this can be seen as a turnaround stock, if they can lay the base to June this year, give an upbeat forecast for the next year and get the acquisition engine fired up again then a share price doubling this year is not out of the question. Start to mess things up and it could go lower than today.

The H1 results later this month and the commentary with them will be important indicators. You are right BSP in that they can't be too far from expectations but confirmation up or down still has important latitude and the future outlook is needed by the shareholders who have, let's face it, been battered over the past few years!