ATM - A2 Milk Corporation Limited

[Snoopy]

It really is difficult to compare year on year results when the company obfuscates them like this.

Continuing the obfuscation theme, let's look at what is happening in the UK and the USA. If FY2014 UK stood on its own. USA only started in FY2015. Now the UK and the USA are bracketed together. So what do the comparative figures say this time about both markets?

	UK (FY2014 Pres.)	UK & USA FY2014 Result, FY2015 Pres.)
Operating EBITDA	-$4.3m	-$4.3m
Revenue	N/A	$1.0m
Intercompany Charges & Licence Fees	-$2.1m	N/A
Segment Profit	-$2.2m	N/A

Unless I have this wrong (and I may have) it looks like the Australian and New Zealand 'Operating EBITDA 'results have been changed retrospectively in FY2015 (see my previous post) so they include intercompany charges and licence fees. However the UK result has not been changed in the same way and remains as bare 'Operating EBITDA'.

It is very disappointing to see the result presentation (apparently) changed for 'ANZ' year on year but not changed for the UK segment in the same way. The intercompany charges and licence fees (*) for the UK in FY2014 (actually the UK segment doesn't receive any licence fees so it must be all intercompany charges) seem to have vanished! It is very difficult for investors to follow what is happening year on year with these kind of reporting inconsistencies.

SNOOPY

(*) from FY2015 report (p15)

Inter-company charges include:
a/ royalties,
b/ licence fees and management fees payable to the Parent,
c/ marketing and herd testing costs payable by the Parent

[skid]

Yes, would have thought certain factions would be screaming blue murder by now.

Rumor has it that he visited David Darling for wine and cheese and really liked his new deck

[trader_jackson]

Rumor has it that he visited David Darling for wine and cheese and really liked his new deck

Yes, where is the news article explaining why the directors of ATM are selling large percentages of their shares? They must be building very large decks as well!

[tomblu]

Surprising this hasn't been discussed, maybe I've missed it. "A2 Milk's Babidge, other shareholders cash in on high share price" http://www.nbr.co.nz/article/a2-milk...ew%2520Edition

It was noted by nextbigthing as referenced by GizyGold on 5/1/16, however I cannot find nextbigthing's original post ...

Originally Posted by nextbigthing
Bubble had started to burst on this the other day, director sold out some shares, world market turmoil overnight.... perhaps worth a short.

[nextbigthing]

Good luck with shorting the hottest stock on the market at the moment. wouldnt be surprised if we see a $3 by year end. Even Fonterra looking the goods. Key with A2 is to get more dairy farmers to convert & supply Synlait.

The 'hottest stock on the market at the moment' has fallen from $2.50 to $1.74 in just a few days, a fall of 30%
Thanks for your good luck wishes, I would like to use your services again in the future

[Joshuatree]

Hee. Meanwhile the Spruikometer has A2m no 1 top of the pops today,but now all the dissecting, wailing and expert opinions and down right bitching has started yep from positive to negative is the theme.Watch out down below!!

[Snoopy]

Continuing the obfuscation theme

It is now time to take a look at the 'China' segment (FY2014) which has been renamed 'China & Other Asia' for FY2015. taking the results for FY2014 as represented in both the FY2014 and FY2015 presentations, what can we learn?

	China (FY2014 Pres.)	China & Asia FY2014 Result, FY2015 Pres.)
Operating EBITDA	-$3.3m	-$3.3m
Revenue	N/A	$4.1m
Intercompany Charges & Licence Fees	-$1.5m	N/A
Segment Profit	-$1.8m	N/A

The fact that incorporating 'Other Asia' into the result retrospectively dioesn't change it is suggestive of the fact that 'Other Asia' effectively did not exist in FY2014. Can anyone shed any light on what 'Other Asia' means in FY2015?

The calculation of the segment profit, as represented in the above table is as follows:

-$3.3m - (-$1.5m) = -$1.8m

Note the double negative creating a positive. This means the segment result is a smaller loss than the EBITDA operating loss. It also means that the segment result can be changed at will by management. All managment has to do is vary the internal 'Intercompany Charges & Licence Fees' and, within reason, they can create whatever 'segment result' they like.

I don't know why the old 'Intercompany Charges & Licence Fees' have been absorbed in the new NZ and Australian division, yet seemingly just forgotten about in the 'UK and North America' and 'China and other Asia' divisions.

SNOOPY

[skid]

I was just thinking of the parallels between Chinas economy (in the last 5 years)and ATM (in the last month or so)--both have taken a nosedive but are still substantially higher than before.
I believe Australia's manic appreciation is sorting itself out and we will find a more ''true value'' and then we can go from there.

I think the company is great,but the market(lead by the Ozzies has been out of kilter) so this is by no means a slag of the company.

I guess its worth noting that milk powder sales in China could be affected ,but who knows at this stage.

[Snoopy]

I don't know why the old 'Intercompany Charges & Licence Fees' have been absorbed in the new NZ and Australian division, yet seemingly just forgotten about in the 'UK and North America' and 'China and other Asia' divisions.

More on the disappearing 'Intercompany Charges & Licence Fees'.

Turn to note 3.1 in AR2014 and 'Licence Fees'' are quoted as a $20.571m dollar item at company level. Turn to note 3.1 in AR2015 and all references to 'Licence Fees' have disappeared!

Odd until you see that A2 is no longer reporting at the 'Company Level' to shareholders. They now only report at the 'Group level'. As a result of this change 'licence fees', which really look like an internal tool to restate profit levels amongst divisions to 'management deemed acceptable numbers' have apparently been dropped (?)

SNOOPY

[winner69]

Snoopy - you (along with others) will never make much sense from a2 segment analysis. Save the effort for other stuff

Just believe the A2 story - a story that says its a billion dollar company and one day maybe a 3 billion company