A calendar year has passed and what has been achieved over the...

A calendar year has passed and what has been achieved over the year.

1. In February it announced the proposed acquisition of Camperdown Dairy Company (CDC) for $11.0M. As a consequence of this acquisition it has become ASX’s only vertically integrated dairy company, having its own dairy farms, processing its own milk, own brands, exports, speciality milk, organic milk and value added milk products. Market capitalisation increased from $14.4M at listing to $50M as at 5 February 2016. (All impressive news) The number of shares on issue as at 3 February 2016 was 166,184,828. Share price was around $0.30 during this period, having dropped from $0.40 at cob 4th. January. At cob 30 December, the price was $0.175 or a fall of 56.25% over one year. (unfortunately depressing news).
2. CDC was widely touted as the Messiah for the company, being a modern processing facility for milk, butter, yoghurt and cream, an established brand, having established distribution channels and an established Export business operations including mainland China. Unfortunately there were delays in the acquisition of CDC and finally on 15 April 2016, the Messiah descended into the kingdom of AHF. It was reported that “The Camperdown factory is small enough to be flexible and nimble but large enough to be a serious player in the specialised dairy product markets both domestic and internationally. Importantly, this control over the final target market means AHF can move proactively into high value-added production, particularly into organic free range milk, the provenance of which can be clearly traced to the prime clean, green dairy region of south-west Victoria”.
3. On 4^th. July there was further good news when it was announced that Peter Skene was appointed as Group Chief Executive having “over 25 years in the areas of sales, global supply chain manufacturing, quality management, research and development and general management”. The jigsaw was now in place and shareholders were delighted and were looking forward to seeing a professional on board to forge the way ahead and realise the goals of the company. It was reported that “Peter Skene’s experience and skills combined with those of the CDC General Manager Chris Melville and other senior personnel at CDC provide a very strong team who are fully capable of taking AHF to a high level of efficiency and profitability”.
4. In late July another announcement was released and caption read “Transitioning for profit and growth positioning AHF for the future” This announcement was not new as shareholders were aware of the contents which were revealed much earlier. Some shareholders were critical of the communication problem between management and shareholders and this was expressed on various occasions in this forum. This prompted management to release a further announcement on shareholder communication and engagement. “We would like to advise you about the different channels we have established to provide both formal and informal updates and information to keep you up to date with AHF’s progress and to receive informal interaction and feedback”. However none of the channels appear to provide interaction with shareholders.
5. On 2^nd. September the shocking news was received on suspension of sales of fresh milk to China. Although such sales only accounted for 2% of the revenue of AHF and would not materially affect the profitability of AHF this was a big blow to the market as the publicity given on this matter was damaging to AHF. What was even more embarrassing was that AHF only learnt of this news through the Australian media and you wonder why it did not come directly from CDC. I view this as CDC not having any control on its exports to China and shareholders were not provided with any information on how business is conducted with the Chinese.
6. The Group’s annual report was released on 30 September 2016 and the bottom line was a $3.7M loss for the year. This was not unexpected and hence it did not have any material effect on the already low share price, neither was there any new information to give any indication on what other changes in operations, acquisitions or goals expected in the coming years.
7. The Q1 report showed a significant improvement in milk production from all the farms of about 55% however this was not significant to the bottom line $ value and shareholders were left wondering about benefits of vertical integration. Once again management appears to be holding back details and giving very scanty information on financials.
8. On 9^th. November an announcement was made about the conversion of Michael Hackett’s convertible notes. As the company does not have the cash to purchase such notes it was converted to shares for both the principal sum and interest. An interesting point to note is that the interest offered was 2% more than the rate from the facility offered by CBA. Mr Hackett certainly got a good rate considering if he put this money in the bank, he would have got about a quarter of the rate. While the conversion reduced the company’s liability, it increased the number of shares and hence a dilution. For a very low price in the value of the shares, the dilution is significant.
9. In November we were notified of a joint venture with Lian He and the setting up of a new plant for sale of fresh milk China. Once again the information lacks details and shareholders really do not know what to make of the JV.
10. The last news for the year is the proposed acquisition of the 10 acres of Camperdown land and some advice of potential joint ventures.

From a shareholders point of view 2016 has been disappointing, share price has fallen from $0.40 to $0.175, and market capitalisation from $66.47M to $34.58M. Directors must take a long hard look at themselves and determine where they went wrong and how they can make changes to see a high level of efficiency and profitability as promised. I also believe that management must set personal goals for themselves using the “SMART” approach and if they cannot achieve this they need to, for the interest of all parties concerned step aside and a new team should be appointed