acg analysis , page-12

Axiomax, you are wrong in stating that the underlying profit is around $1M. You have assumed that none of the other income (total of $1.7M) will be received in FY14. I will now examine in detail each of the other income items in turn to assess the underlying profit.

Firstly, the $697K for the R&D Tax Incentive will not disappear completely in FY14. The scheme still operates and I believe that Atcor is still reinvesting in R&D. I will assume a reduced payment of $500K in FY14 as I prefer to be conservative.

The $512K in Government Grants is less certain. The scheme still exists to help small companies take a new product to market. As Atcor continues to bring out new products, it may still receive a payment under this scheme but I have chosen to assume only 250K for FY14.

The foreign exchange gain of $510K may or may not be repeated so it is probably best to assume it won't get any benefit this year.

Hence, in my calculations, I have normalised the FY13 result by taking off $969K, to give a normalised NPAT of around $1.7M.

Atcor experienced strong increases in goods and services sold of 40.6% in FY13. With their upgraded tester and growing penetration of the drugs trial and specialist markets, it is reasonable to conservatively expect at least a 25% gain in FY14. Assuming the same margins, that would translate to an NPAT of $2.1M in FY14 (see my post of 1 Sep for more detailed analysis). There is a high probability of this being easily exceeded.