Tightly held. Limited spread. 24M shares on issue. Share price...

Tightly held. Limited spread. 24M shares on issue. Share price in the low-90s.

Revenue at the 1/2 year mark of $140M. profit before tax of $1.023M. Profit after tax of $677K.

Net assets of $14.7M.

However, the Balance Sheet is poorly constructed, with Current Assets of $27.4M, and Current Liabilities of $42.5M.

Of immediate concern, payables (ie: trade creditors) total $36.1M, vs cash of $795K, and receivables of $14.7M.

Liquidity is a concern, as cash has fallen by $12M since June 2003, Receivables have increased by $8.0M, as have Inventories (also by $8.0M), whilst trade creditors have blown out by $14M to $36M (previously, $22M), and short-term banking facilities (ie: overdraft) has increased from $1.2M to $6.0M.

Opportunity rich, but cash poor, despite the tremendous increase in revenue.

It would have been a good company to work for, to unlock and sell off the technology assets (spin-offs, etc), but management seems intent on maintaining tight control. Hence, the lack of institutional presence, the lack of research coverage, and the lack of interest from the institutional end of town.

On the 26th (March), there was a major feature on AFL in The Australian, featuring Julian Little, and the Bill Express system, and contrasting it to Australia Post and the Bill Pay system.

To grow, AFL needs to shore up its Balance Sheet, spin-off some of its businesses, and move internationally into the hotly contested Asian and Singaporean markets. But, without institutional support, or heavy dilution of the existing Directors (who control upwards of 85% of the issued capital), this is unlikely.

A company, therefore, that could well reach $300M in FY03 turnover, but only generating $2-3M in profit.

As Ron Brierley and John Spalvins would both say, a carve-up opportunity beckons.

I hold for the spin-off opportunities and the carve-up.