This is based on following/investing it for last 10 years and analysing the annual reports.
BSA acts as a billion dollar company whereas its just a step above a mum and dad shop, which to the contrary are run very efficiently by its owners. One of the biggest issue with BSA has been its fat corporate structure and at one point they had a MD,CEO.CFO,CTO and way too many directors. All for one large client nbn which derived majority of its profits for few years (and prior to that FOXTEL). Outside these two contracts BSA hasn't done anything substantial (profits) in any of the contracts including APS (whatever that means).
I spoke to some of the BSA techs who came to service my optus and nbn and they told me they report to supervisor, who report to state manager who report to national manager who report to some GMs. You can very well see where the problem lies. Also, the techs were not employed by BSA but external contractors - the sense I got was BSA had a fat structure for delivery and everyone was on passing to the person below.
As far as I know the BSA model is majority work being done by external contractors. The issue with this is they themselves are see as contractors by the likes of nbn etc. When you use external contractors you are fixed with giving away most of the monies and left with little margin to pay your costs and make profit even when you scale up (very unlikely). You pick up the downside when the volumes shrink. Not sure but they should have 60:40 model of internal: external
The company is not on a growth trajectory and being a service business should aim for 8 to 10% EBITDA minimum. That way they have a organic means to grow and accumulate cash for growth.
Looking at the executives profile there seems to be heavy skew towards accountants. Nothing against accountants. But the company needs people to deliver for clients not accounting wiz. When a company starts filling up with accountants, the accountants start dictating to operations people and the operations people try to learn accounts - they lose the plot. Focus on delivery and results will flow by itself.
Revenue is meaningless if you are clipping the ticket. The EV shows the actual worth. The recent annual reports look flossy with things like systems, analytics etc. Once again I fail to get what is their core competence. Are you an Uber with the slickest systems? No you are not and neither do you have the scale right now. Focus on operational delivery! period
The recent Annual report seemed very dubious and I have written about it earlier. It tried to hide figures etc.
My take is the company will be in serious trouble by June or when they release the June numbers. Few additional cash isn't going to save anything. They need to doe some deep catharsis. Can it be done? On paper yes, trimming the unnecessary fat , have hands on people focused on delivery, no marketing gimmicks, outsource what you arent good at (whether its systems, accounts, or anything). Focus on delivery, making profit and building up cash.
At this stage it can be a good target for some PE firm although there are 3 major shareholders and god knows if they know ground realities. I see the share price around 8 -10 cents and lot depends on market conditions. If those deteriorate then its anybody's guess.
BSA Price at posting:
9.3¢ Sentiment: Sell Disclosure: Held
