AVR (ASX) Cost Saving Strategy

Originally posted by tommyxu ↑

The below is my email to Wayne.

Hi Wayne

First of all, congratulations on your new appointment. I think it is time for this company to change its leadership. I am sure you can make it a better company in the near future.

My name is Tommy and I am originally from Shanghai China and currently live in Perth. I hold 63107 units of AHZ shares. I bought at $1.65 in 2014 and $0.67 last month. It was half of my total savings after 5 years of full time work. I really believe in the long term future of this amazing company. Unfortunately I have already lost more than half of my hard-earned money in the trading account for this company.

Many retail shareholders are losing confidence over the cash burn issue of this company. The company is currently in a vicious circle: Burn cash - More Capital Raising - Diluting Shareholder Value - Burn Cash - More Capital Raising..

For me, it looks like the key issue here is the financial uncertainty of the company. We need management to address this issue as soon as possible.

In summary, we would like to know

1. The estimated timeline towards profitability
2. How to control cost: Cost reduction strategy of the company going forwards
3. How to raise future capital if needed

I have regular contacts with Julian Chick and he do answered 2 of the above questions. However, I think it is better for the management to give an official update to address these burning issues to all the shareholders.

If not, the current uncertainty in the market (which has been around for a while) will push the share price down further.

Thanks.

With Regards
Tommy Xu

I got his reply last night which is very long and in details.

I won't post it here but the summary point are below:

1. He is currently reviewing all cost and strategy of the company with the whole board and he intent to report to the market in the near future with regards to my specific questions.

2.He has not seen a more efficient global structure in terms of sales teams and he believed that the management has built a very efficient and lean structure.

3.The company culture is one of the best he ever seen: many people work more hours beyond their paycheck would otherwise warrant.

4. Regarding potential future capital raising, here is what he said "I have invested in many ASX health care companies over the years and have often felt the frustration of poor management and poor communications. This will not be the case with Admedus. As for cash burn , again I have seen other companies collapse through ever decreasing capital rounds on the ASX with no prospects of revenues and even been caught myself as an investor in those situations. Admedus is not that company - we raise and invest to generate revenue, support development and build our capacity. Our commercial path forward is clear and obviously we already have ever increasing revenue streams. Capital increases must be seen in the context of the ROI , the key question is always for every dollar invested what is the future return on that dollar. Some companies on the ASX have not been good at this in the past and as such I appreciate the concern of investors. Be assured I have spent my whole career managing ROI , and with the CEO and board we look at Admedus through his lense. Any potential capital raisings will add future value to the company and your investment. Building a global business in a sustainable and fiscally responsible way however is a marathon , not a sprint. Dilution is always the concern of any investor, which I understand, but this must be put in the context of the longer term value proposition. If one has an investment window of 6 months , that is probably not the right approach for a company like AHZ (or many public companies that are early stage for that matter)."

Ok, I can see he spent a lot of time and effect applying to my email. But what you guys think of the points above? Thanks.

Expand

Thanks for sharing this info Tommy. It does sound like WP is preparing investors for further capital increases, and quarterly figures suggest that it will be necessary. Cash will run out around dec-2016 at the burn rate reported for the december quarter.

Blue line is historic cash at EOQ, green line extends this based on cash flow for the December quarter. This is optimistic since that quarter included a substantial r&d tax rebate and consequently the situation shows a much better cash runway than the previous quarter (also helped by the Sabby CR, of course).

The yellow line depicts the perpetually unrealistic end of year cash forecast from the Morgan's report.

Exee

No.	Vol.	Price($)
1	300	$9.80

No.

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Price($)

300

$9.80

Price($)	Vol.	No.
$9.91	475	2

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$9.91

475

No.	Vol.	Price($)
1	300	9.800
1	200	9.600
1	2	9.540
1	330	9.510
2	1185	9.500

No.

Vol.

Price($)

300

9.800

200

9.600

9.540

330

9.510

1185

9.500

Price($)	Vol.	No.
9.910	475	2
9.990	99	1
10.000	250	1
10.500	10005	2
11.000	5000	1

Price($)

Vol.

No.

9.910

475

9.990

10.000

250

10.500

10005

11.000

5000

(20min delay)
Last $9.91		Change -0.090(0.90%)		Mkt cap ! $209.4M

Open	High	Low	Value	Volume
$10.00	$10.00	$9.65	$70.76K	7.202K

Cost Saving Strategy, page-28

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