The Australian Shareholders Association (ASA) has compiled a list of what it calls 'last day laggards' or companies that wait until the last possible Friday to announce their results to market.
According to the ASA Director of Policy Stephen Mayne: "An analysis of the data shows that of those 243 results, 181 were losses and only 62 were profits." According to the well-respected shareholder activist: "One hundred and twenty-six of the reported 243 results occurred after the market had closed."
In my opinion, it's a black mark against a company if it tries to bury a poor result in the 'last day laggard' deluge. However, this is a criterion I've never monitored before, so this morning I applied the test to my portfolio and watchlist. While most 'last day laggards' are loss-making resource companies that I'd never touch in the first place, here are 11 'last day laggards' that appear on my watchlist.
Mobile commerce and advertising company Moko Social Ltd (ASX: MKB) waited until after 6:20pm on the last Friday to report that they had made a loss of over $5 million compared to about $3.1 million in the prior corresponding period (pcp). The company also saw a reduction in receipts from customers from about $12 million to just under $5 million in the pcp, and reported negative operating cashflow of over $2 million compared to under $1 million in the pcp.
For reasons I'm not smart enough to understand, the market says Moko is worth $107 million. I guess shareholders have the expectation that the company will be able to rake in recurring revenues from setting up sites that host user-generated content. While I'd be surprised if the company doesn't get at least one niche site up and running profitably, that may not be enough to justify the current market capitalisation. As Fairfax Media Limited (ASX: FXJ) has found out, it's not always easy to make money from online content.
Reporting at a slightly more respectable 1.13pm on the last day, solar technology commercialisation company Dyesol Ltd. (ASX: DYE) reported that it had received lower revenues in the half, leading to a doubling of cash outflow and a loss of $4.2 million. Dyesol has a market capitalisation of just over $75 million, so I think it's big enough to get its results in before the last day, although I tend to cut smaller companies a bit of slack.
Childcare centre operators Affinity Education Group Ltd (ASX: AFJ) released their first ever half yearly on the last day possible. They informed the market they had lost $8.8 million for the half. I should disclose that I once owned shares in Affinity Education, though I lost confidence in the investment and sold for negligible profit some weeks ago. Virgin Australia Holdings Ltd (ASX: VAH) also delayed until Friday morning, before filing their loss of over $80 million.
Perhaps worst of all was drill owner Ausdrill Limited (ASX: ASL) which waited until 8.13pm – well after the market closed – to report a reduction in profit of 69%. As Stephen Mayne notes, "the former Leighton boss Wal King is on the Ausdrill board." Other resource companies reporting losses on the last day of reporting were Tap Oil Limited (ASX: TAP) and Maverick Drilling and Exploration Ltd (ASX: MAD).
Investors should note, however, that some companies report reasonably good results on the last day. For example Retail Food Group Limited (ASX: RFG) reported a record profit of $17.2 million, at just before noon. Also on the last Friday, Woolworths Limited (ASX: WOW) reported that profit had increased 8.5% to over $1.3 billion and almond grower Select Harvests Limited (ASX: SHV) reported a doubling of underlying profit and strongly improved operating cashflow. Select Harvests has consistently exceeded my expectations, and I regret not buying shares in the company when I examined it a few months ago.
Foolish takeaway
If a company is reporting a loss on the last day it is permitted to do so, shareholders should be wary of the possibility that it's an attempt to bury the poor results in the last day deluge. Having said that, if the company is very small, with a market capitalisation of below about $30 million, it's worth considering the possibility that its resources may simply be overstretched.
Nonetheless, I was disappointed to see that a small speculative technology company that I own, Resonance Health Limited (ASX: RHT) was only able to report by 8.30am on the last possible day. Although I was happy it had reduced its loss (by 67%) and increased revenue (by 61%) over the prior corresponding period, I'll now be reviewing the company with an extra critical eye. If you have a last minute laggard in your portfolio, I suggest you do the same.
