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Maysgr

1,671 Posts.

280

31/10/19

12:02

Post #: 41168926
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Originally posted by Maysgr ↑

I haven't been paying a huge amount of attention to GSW lately, but I have noticed the significant appreciation in the share price in the last few months. Congratulations to those who have reaped the rewards of being a holder during this time.

I read the quarterly yesterday, and also went and had a read of the Annual Report (AR). Some of the information in the AR is simply staggering.

Joel and Bane, wow...what can I say.

GSW got a first strike on remuneration last year. What do they do this year, give themselves big rises. Some here defend the pay rates and the executives.

They also respond to shareholder concerns about Director performance. Notice the comments. No reflection on themselves, it all appears to be blamed on the performance/skills of Directors who resigned in April 2019 (the ones with 20 years industry experience, or significant corporate governance experience including being a deputy chair of ASIC for example). Obviously they have been receiving plenty of fan mail about their performance, and seem oblivious to the fact that they are the ones being pursued by ASIC, not the ones who resigned.

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It's also worth noting they continue to vigorously defend the legal action. Over the last 2 years they have spent $9 million of your money ($3.8m FY18 and $5.2m FY19) in legal fees.

I'm not sure how this will change going forward given the termination of the agreement with former Director, Brett Eagle, to provide corporate governance and legal advice to the board, at the cost of $17,000 per month.

This is with the same guy who was added to the ASIC charges earlier this year, for alleged law breaches.
I'm unsure why they continued to deal with him, given his likely involvement in the business during the times where they are alleged to have made misleading announcements.

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The figures around these 2 acquisitions intrigue me. What a surprise that the board have determined that these businesses will be reported as one bulk figure with the original business going forward. In other words, the board don't want you to know how each business in performing. What a surprise, and in direct contradiction to information conveyed to them by shareholders previously.

These businesses appeared to be close to going out the back door (broke) when they purchased them. They had $9k cash in the bank, which was effectively negative when you factor in trade receivables and payables.
The majority of the acquisition costs relate to the purchase of goodwill, computer software, and contracts and customers.

The 2 businesses generated $806k in revenue in the 4.5 months since acquisition. That's around $180k per month. There is also the possibility of further payments on an earn out.

This means the original GSW increased revenue from around $770k to $1.3m during FY19.
I wonder if this is reflective of the quantums that were promised in times gone by.

The developments announced in recent releases appear positive, but the financial impact of these remain to be seen.

I would be more comfortable considering an investment here is Joel and Bane were gone, and the legal action was all resolved.

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GSW Price at posting: 59.5¢ Sentiment: None Disclosure: Not Held
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