Gunns: The next chapter

The Truth and Reconciliation Roadshow continued last week with a presentation by Gunns’ CEO to a conference run by investment bank UBS, coincidentally a Gunns’ shareholder.

The changes from the presentation which accompanied the release of Gunns’ preliminary 2010 financials in mid August were subtle and revealing of the future chosen path.

John Gay’s business model was then described as being “a conglomerate of long life low yielding assets…..(consisting of) many businesses….. excessive levels of encumbered assets .....excessive debt levels to earnings,..... (where) potential investors do not understand the business.”

The latest presentation includes further criticisms of the old model. Mr L’Estrange confirmed that Gunns was “cash negative” and was bedevilled by “aging inefficient assets”.

Cash negativity is a fairly serious condition. If it persists disaster usually awaits. Aging inefficient assets make the problem worse.

Forget about a social license. Gunns needs cash and a more ‘efficient’ portfolio of assets.

Ponzi Government?

It was pleasing to see the burgeoning discussion of the problems confronting the State being attempted in the article Ponzi Government HERE.

But a lot of the assertions were either wrong or exaggerated.

To start with the title of the article is misleading. The current cash flow problems of the State Sector in no way resemble a Ponzi scheme.

Insolvency and Forestry Tasmania

If there are times when Forestry Tasmania’s appears secretive, maybe it’s because it doesn’t always know what’s happening.

It was unaware of its possible insolvent status until it was pointed out by its Lender, Tascorp, the State Government’s finance arm.

Forestry Tasmania’s recently released 2010 financial statements revealed that it had breached lending covenants. The breach which had been overlooked by the Directors was discovered by Tascorp when reviewing the 2009 financials.

Gunns: Is the worst over?

The forest industry’s slow motion train wreck continues its inexorable journey.

There are many, on both sides of the forest debate who appear to accept the urban myth that had it not been for the actions of high profile activists, Gunns’ former CEO would still be ensconced in Lindsay St Launceston.

A quick glance at the ASX announcement on 16th August 2010 outlining Gunns’ achievements in the financial year 2010 reveal that Gunns’ old business plan was a failure. The company’s old model was described as being “a conglomerate of long life low yielding assets…..(consisting of) many businesses….. excessive levels of encumbered assets .....excessive debt levels to earnings,..... (where) potential investors do not understand the business.”