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Quintis Ltd posts massive $416 million full-year loss

It has now been over six months since Quintis Ltd (ASX: QIN) shares were last traded on the Australian share market, but outside the market the business continues to operate more or less as normal.

On Tuesday the embattled sandalwood plantation manager filed its full-year results and revealed a massive statutory net loss after tax of $416.8 million. This compares to a $90.1 million after tax profit in FY 2016.

The biggest contributor to this disastrous result was a non-cash pre-tax $307.4 million reduction to the fair value of Quintis’ biological assets. This was made in order to reflect the input estimates following the completion of its fourth plantation harvest in 2017 and the ongoing assessment of the assumptions applied in its Directors’ valuation.

Among the changes were a reduction in forecast heartwood yield, a decrease in projected oil content, and an increase to the discount rates used in the fair value calculation. Following this revaluation, the value of its owned plantations was $342.8 million.

A further non-cash impairment of goodwill and intangible assets of $154.7 million before tax was made largely to the value of the goodwill and in-process research and development intangible assets of its pharmaceutical division Santalis.

Lastly, lower revenue also played a key role in the poor result. Revenue came in at $97.4 million, 49.2% lower year-on-year. The main contributor being a fall in revenue from services. Quintis failed to sell any plantation investment products in the fourth-quarter of the financial year. Generally the fourth-quarter is the period in which the majority of its plantation sales are completed.

Should you invest?

No. In my opinion this is a company that should be avoided at all costs when its shares are finally reinstated to the share market.

That is if they are reinstated, of course. In yesterday’s release the company’s directors noted that there is a material uncertainty in relation to its ability to continue as a going concern. The best hope the company has is to follow the example of Slater & Gordon Limited (ASX: SGH) and hope that its lenders support its plan to recapitalise.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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