AFT hits an important milestone

By Stephen Bennie

Initially a relatively early stage and growing company, such as AFT, will use all available funds to invest for future growth. But a company will often reach a stage of maturity on that growth path where it will start to pay a small amount of available funds to share holders in the form of a dividend. In the case of AFT they have set their dividend to be in the range of 20-30% of net profit after tax. This still allows for the significant majority of earnings to be reinvested into the business for future growth, but it also indicates that the board expects on-going positive and increasing earnings. This is because the dividend policy of 20-30% would mean a lower quantum of dividend if next years earnings were lower, and frankly the board would not have started paying a dividend if they thought such an outcome was remotely likely. That is because dividend cuts cause investors extremely severe headaches. Which takes us neatly to Maxigesic.

Sceptics, and we know there are some of them out there, argue that AFT is a one trick pony and that is Maxigesic, and furthermore it’s not even much of a trick. Maxigesic, AFT flagship product, is a pain medicine that gives you paracetamol and ibuprofen in one package. And its true that an individual can essentially replicate it by having a tablet of Panadol and a tablet of Nurofen. To form a favourable view on AFT, an investor would have to believe in two outcomes, that Maxigesic has a large addressable market and that AFT has a pipeline of other products that have large potential markets.

So firstly, can sales of Maxigesic take off round the world? If the example of sales in Australasia is anything to go by, the simple answer is yes. The key factor at play appears to be convenience, why take two tablets when you can take one. There are so many examples of people opting for convenience, people buy sliced bread even though they have a knife, people use remote controls to operate televisions even though there are buttons on them, the examples are endless. Convenience is king and Maxigesic offers that. AFT are working hard to offer that convenience in as many easy-to-use forms as possible. This is demonstrated in the diagram taken from the recent ASM, which shows that AFT have developed several ways other than tablets to take Maxigesic. For example, early sales of the brand new Maxigesic Cold & Flu Hot Drink have been encouraging.