Ann: Rural Services Trading Update , page-84

At this point the company would be in a sound financial position

I'm not actually sure that will be the case conan - unless someone is willing to pay a ridiculous price for RS in which case I'll make sure I steer clear of them for destroying their own shareholder value.

Plus "sound financial position" is only possible due to the fact that the company isn't obliged to pay distributions on the PAs and they are not "debt". Otherwise I suspect they would not be trading even now.

RS made EBIT $29.5M to June 2012. They'll make an EBIT loss for the half year. What multiple does one pay for a struggling business, that has been under-invested in, that needs restructure? Also, although ELD gives reasons for the fall in EBIT (one being livestock prices) I would actually consider the peak prices of prior period abnormally high, rather than current prices abnormally low (albeit there is upside). So the $29.5M is potentially not a sustainable earnings level. A purchaser will have their own thoughts on that.

It seems very likely, to me, that there will be some residual bank debt post RS sale (assuming sold). Add the $145M PAs to that for "true" position. "Underlying EBIT" - don't all poorly performing business love that term - of $18.5M 06/2012 less corporate overheads of $9M. If they pay all bank debt out with RS sale, they will still struggle to pay just distributions on PAs. In fact, I wouldn't expect any distributions for a period as they'd use free case flow to invest in auto.

In short, nothing I can see that will put this business in a good position in the short term.

Sorry for the negativity. I just can't see anything positive happening here except for the bankers maybe.

MJS