AFG 2.73% $2.63 australian finance group ltd

its all over at allco

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    It's all over at Allco

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    Related Coverage

    * Allco shares hammered on results, restructure
    * MALCOLM MAIDEN : Allco's future is out of its hands


    * Michael West
    * February 25, 2008 - 11:56AM

    This thing is gone.

    The Allco recovery plan is to beg for some breathing space from the banks, relist the shares, sprout a bit of motherhood stuff about a new strategic business plan and tap the market for more capital.

    It's a miserable failure if the stock price - down $1.83 to $1.22 at the time of this publication - is any indication. Allco had always relied on bamboozling the market with fancy structures. People, finally, don't believe it any more. Nor should they.

    Every listed Allco structure has been a failure. Why would investors decide to tip in money now, especially as the goodwill is zero?

    Not quite zero yet according to the belated Allco accounts. Goodwill is still booked at $1.3 billion though directors have augered for a writedown.

    Elsewhere - and things will become clear later today - there is no mention of David Coe and his future, nor is there anything much in today's statement on simplifying the ridiculously byzantine Allco structure.

    Operating cashflow for the period was negative, there is $6.5 billion in debt in the parent entity, another $7.8 billion in the assorted spin-offs and heaven knows how much in the assets underneath.

    As usual, any useful information is interred in the notes to the accounts, although to give the board its due, the language is not quite as obtuse as usual. They have been chastened to be sure - not to mention put on notice by their lawyers.

    In the notes on liabilities is the $250 million which needs to be refinanced by May, but there's another $900 million facility from the banks which also needs to be rolled, paid down or renegotiated.

    These guys have played the market for fools for far too long and now the market will be reading the notes, not the marketing materials.

    There is also a load of bottom-covering from directors - fearing lawuits - and from the auditor KPMG. Today's statement was not even an audit though KPMG saw fit to prepare for the worst by saying its bit about ``material uncertainty'.

    The material uncertainty is whether the banks will get their money back from this mess. For shareholders the future is even more materially uncertain.

    The banks have clearly told Allco to try to salvage the group by restoring market confidence and raising more equity. They have nothing to lose by this, but shareholders do.
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