Liquidity/Solvency - The "Current Ratio" weakened by ~60% from last year (2022 = 2.4:1 2021 = 5.9:1) whilst the "Acid Test" weakened by ~75% from last year (2022 = 1.2:1 2021 = 4.6:1)....more cash needed?
Profitability - The "Gross Profit Margin" weakened by ~15% from last year (2022 = 55% 2021 = 64%) whilst the "Return on Equity" weakened by ~20% from last year (2022 = -44% 2021 = -36%)....discounting?
Efficiency - The "Days Debtors" (how long it took to get paid) showed great improvement from last year (2022 = 36 days 2021 = 113 days) whilst "Days Creditors" (how long it took to pay the bills) also improved (2022 = 51 Days 2021 = 67 days)....Good to see!
Some Comments:
Goodwill on BLC: This goodwill of $3.4million seems to be calculated, based on "assumptions", using a 5 year projection of cash flows based on the growth rates on a mix of sales & price volumes, gross margin and costs.This seems weird to me
To illustrate my point , over the same period as above, Air New Zealand increased its sales revenue by ~8.5% BUT it also increased its bottom line LOSS by ~102%. How is that good for the shareholders and especially their Goodwill?
To me, it should be based on the growth of "tangible" returns to the business like, historic net profitability, free cash flows and net profit margins etc. In BLC's case, from memory, it had 30 years of losses and only 1 year of net profit (immediate year prior to acquisition) of ~$500k and yet the Goodwill that AN1 had to pay was equal to ~7 times that sole year of Net Profit.
2. AN1's Profitability would have been markedly weaker had it not been for the $1million in "deferred consideration" gifted to the Revenue column from the acquisition of BLC. It has been listed as a "liability" in the Notes, so to me, it should have been accounted for as a "Liability" on the Balance Sheet. This just reeks of "smoke & mirrors" in my opinion but as Mr Beard is an Accountant and it has been audited, it must be legal.
3. I note the continual issue of New Shares. This year, the BLC acquisition meant an ~18% dilution to existing shareholders so that needs to be factored in. I'm not a big believer in funding acquisitions via the issuance of new shares. If the business can't afford to pay for the purchase of another business - in order to grow their own business footprint - without diluting their own share register, then they should grow their own business organically, which would have the effect of enriching their shareholders.
AN1 Price at posting:
3.2¢ Sentiment: None Disclosure: Not Held
