James Thompson wrote a piece in the AFR citing Gary Wiess’ advice to CFO’s, suggesting, they focus on the numbers, “of course.”

He goes on to say “At the very basic level, it is the accumulation of the financial data in a cohesive, coherent manner that can be understood.” Sounds simple but as Weiss says, “it’s not always a given.”

The example he sites, after seeking a board position based after the procurement of a 10% stake in Ardent (the leisure group) in 2017. The business, in an attempt to “curry favour” with shareholders, released what it called its core EBITDA, $76.1M – for the full definition, check out the article its quite comical. The trick is in the word “core.” When the actual results were eventually released, they showed an actual loss of ($60M)– that’s a swing of $136.1M. In effect, the core EBITDA was about as much use as a chocolate fire guard and a lot more dangerous.

The numbers should always reflect what’s really going on, knowing them is one thing, being able to articulate them, takes real skill. Knowing and being able to explain the numbers, providing genuine insight, is essential when doing a deal. Having a coherent view on the outlook is also a big part of the exercise. After all, a buyer is buying the future of a business.

Final point, we concur with Wiess on the fundamental importance of the balance sheet, he calls it “the first port of call.” My first non executive appointee, Russel Smith used to “say never give me the P&L without the balance sheet, without a fully reconciled balance sheet, it’s useless.” I would add that the numbers without a clear and concise narrative are also fairly useless and invites a guessing game.

Quick tip, buyers nearly always guess to the down-side! Don’t skip the narrative.                      

If you are considering your options around succession and exit, talk to me or one of my colleagues, we are very active in Australia representing the shareholders of established private companies wishing to exit.             

Best,

Mike          

References:

       [1] AFR – https://www.afr.com/chanticleer/confessions-of-corporate-australia-s-great-bulldust-detector-20241119-p5kru0