Please forgive me if I seem fixated on the lousy performance of this board and management, I don't wish to be so, but the numbers speak for themselves. In fact, their performance is almost at a level where Shine Lawyers or Slater and Gordon might express a passing interest.
The latest announcement is a massive red flag to the COMMUNICATIONS Division, though as one other contrtributor pointed out, a slightly rising 1HFY17 EBIT for the other two divisions isn't brilliant, when you factor in the acquisition of Bexton Consulting and Certitude which weren't there for all of 1HFY16.
In a cleverly worded announcement, which is devious at worst and mildly deceptive at best, the reality is this: The Communications Divisions likely EBIT for the 1HFY17 year is around $400k...down from $944k in 1HFY16.
Now, understand this. PSA paid $9.946m for Allcom Networks Pty Ltd and $2.801m for Allcom Consulting Services. At the time of reviewimg this company on the prior and post acquisition performances I thought they were very over priced. Results for 2HFy16 confirmed this, as will the results for 1HFY17 when released.
Okay, so think about purchasing a business which is likely to genetrate a FY17 EBIT of around $800k (double the Communication Div 1H result).What would you pay?
For me, risk and reward are very much related. I'd be wanting a minimum of 15% EBIT, even in this low interest environment. I'd actually offer PSA much less than this becasue the cancer is already on the inside and I'd be concerned about the damage in the marketplace. Falling revenue will confirm thus. Unless I could pick it up for way less than $5m, I'd walk away.
Yet our fearless leaders of PSA paid $12.747m for these two businesses (Allcom Networks and Consulting).
Did they overpay? YES
Have they badly managed post acquisition? YES
Should they write off goodwill? YES, at least $5m to $7m
Should they seek redress against the former owners? YES
Should they review their other "investments"? YES...SAS goodwill needs a degree of impairment.
Bottom Line: I have now seen four halves of disappointment and management strategies that have not worked. It's time for the new strategic plan to include a damned hard look at the people in positions of power.
We need an activist shareholder who is prepared to rattle the bones with this company. The board should be put on notice, an independent director appointed who is a results oriented, son-of-a-bitch, the CEO must be replaced and Mike Leigh and Andrew Smith (the massive benefactors of the Allcom deal) should be dismissed for poor performance and actions instigated to claw back overpayments.
Sorry, its a tough world. Significant shareholder money has been lost through incompetence.
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