does nbs have responsible management?

I had originally bought NBS with a long term buy sentiment and subsequently closed out my position since I was not content with level of communication as expressed by many on this forum.

With the price action yesterday, I had a read of some of the posts and in response to one of them added a couple of comments. I then thought I’d read through the accounts in more detail since there may be something in the detail which would allow me to change my opinion and buy back into NBS at these levels (or maybe below if the market continues to weaken).

That said, I did not read the accounts entirely – I got to the point where I had read more than enough to change my sentiment from “None” to “Sell”.

I had written my previous post on NBS and then continued with the detail below and decided it best to start a new thread since there are quite a few topics on this one – mainly covers directors not doing their jobs very well IMO.

I had already written the previous post before reading the accounts and hence posted that with my initial sentiment of “None” - you will note that this has changed to "Sell".

Disclosure:
In the (unlikely) event that I buy it will be for a daytrade – I have no current orders in the market to buy (nor short) on the info provided and I do not intend to place any! This post is IMO, please DYOR. I will let sleeping dogs sleep.

My conclusion:
IMO, it would not surprise me if (unless something serious changes for the good or is lurking behind the scenes and we have not been informed of yet) both directors and auditors are asked to explain themselves for what is going on here.
See for example my comments below on FX exposure which IMO should be a separate material item to note as a post balance sheet event, since it is an unhedged FX exposure currently equating to a AUD10m per my calculations.




Areas I noted while reading through accounts just released:


FX exposure (Page 40, Note "i")
Debtors are denominated in non-AUD currencies. The AUD has strengthened since 30 June. While the revenue is recorded in AUD at one rate, the physical receipt when/if it is forthcoming will be less (given the amounts of the debtors is likely to a be negative FX difference to P&L for a few million AUD)
AUD/MYR rate has moved +6.8%
AUD/USD rate has moved +9.3%

According to the FX sensitivity table on Page 41:
(weighting actual FX movement versus the 10% indicatives they have provided)
USD : impact 5.8m negative to P&L
MYR: impact 4.2m negative to P&L
Cumulative at 30 Sep = 10m down

I would consider this to be material and should be highlighted IMO by auditors (if not management) as a post balance sheet event to the accounts.



Debtors terms (Page 34, note "k")
30-90 days is very broad. An additional 30 days before considering debts impaired - this allows management and the auditors a lot of freedom to hide behind the accounting policy as a reason to say that the debtors were "acceptable risk" at date the accounts were released to the market.



Vietnam project
Letter of intent signed 6 Aug 08 - notice to ASX advising it was going to tender over a year later on 2 Sep 09 or there about date! And for this 2 of the directors got a 500k bonus each!!


Future developments, prospects etc
No disclosure - again claiming same reason as announcement stated on 2 Sep to ASX. This is too vague to say none - they could go high level ball park stuff without risking competitive issues. I would have concern here since too vague (IMO, irresponsibly vague)





Corporate governance items:

Audit committee (Page 7, Item 4.2)
Very relaxed policy on Audit committee (which IMO should be tackling the cash receipting issues as a key credit risk – they disclose lack of recommended independence of committee. It does disclose that PKF, the auditors, attend these meetings which is a plus - but surprised that they have not pushed harder on the matter IMO)
Item 4.1 - read above in context of Item 4.1 too!!


Risk management (Page 8, item 7.2)
Meet 6 monthly, but sometimes 3 monthly - too infrequent for the pace with which the claim to be moving and the number of contracts etc that they are pitching for - also there are 28 meetings p.a. - why cover off risks just 2-4 a year??
Letter signed on 2 Sept by CFO (Dykes) and CEO that all good!! Why not sign a new piece of paper on 30 Sep at same time as releasing this report - given the exposure to cash default risk - I am surprised unless they could not responsibly sign the declaration again at this date.


Remuneration committee (Page 5, Item 2.5)
Non-existent. Some babble in the accounts that Board know each other well as a team and know how each other perform so they can determine each other's performance and how much they should be paid according to market forces - I would be interested to hear of timing of approving bonuses - Dykes as CFO is not on Audit committee I do not think (why not?) and he got a 500k bonus (only 225ish was guaranteed.


Directors contract terms and remuneration
12 month notice either way - by the way that have demonstrated responsibility to shareholders and communication, and at approx 800k p.a. before share options I do not like this since it is costly to get rid of them - they have a great deal




Options issued 12 June (then cancelled)
These were cancelled on 24 July and re-issued (after obtaining advice bla bla - see announcement of 24 July – though non clarity of what this advice was) - If NBS paid a 4.2m for the options expense surely they could have got the advice before. I am not up to scratch with options expensing - but assuming these issued at 50c would have cost company more than the ones which replaced them at 75c - and for this "error" the CFO got a 500k bonus? - all that said, I am not positive on ins and outs of bonus expensing and insufficient detail is made available about 24 July options so I feel vague on this point other than to ask the question and would appreciate input from someone else please.


The list could go on I am sure, but to be honest I had read enough….

My sentiment is with holders (since I know I’d not want to be one right now) – IMO you should hold your directors responsible and accountable for lack of communication and vagueness thereof. I read from another poster that they were not taking calls nor speaking to analysts for the past few weeks!! This does not sound good to be either...