VOR (ASX) Ann: Appendix 4E Preliminary Final Report

Originally posted by marky999: ↑

no issues for me in the numbers.... with such a high gross margin % then that level of employee costs is reasonable. The tipping point to increased profitability will be how much we can grow revenue vs growth in the underlying costs. R&D spend hopefully will start leading to some further recurring revenue. No change in the value of investment held in TSI India but in 2018 that was subject to revalue between prelim & final so could still be upgraded before final report

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The high gross margin is what one would expect from what is essentially a services business...with minimal capitalised cost of goods sold. Correspondingly, one would also expect a relatively high opex percentage of revenue. The real question however, is the nature of that opex....how much is essentially a fixed cost and how much is variable. If it is largely fixed then the upside value of ongoing sales growth is massive. Conversely, if the opex is largely variable, then revenue growth will not deliver much shareholder value. Shareholders will celebrate reported top line growth numbers if we know how it translates to the bottom line. Today's release has not shed any light.

On the prelim numbers provided...net margin is about 3.5%. Hence the importance of knowing the fixed/variable flavour of the opex. Return on capital employed (ROCE) is going to be the key thing to look at...though at the moment, with the granularity of information (not) provided, this cannot be accurately calculated as the capital employed takes in the Cloudten acquisition, but the revenue (and resulting profit) is not for a full operational year.

Commentary with such numbers is key. It's absence is disappointing. Share price will reflect a forward looking view of the company potential. Till the market can make reliable predictions of the next 3-4 quarter's revenue potential and hazard an informed guesstimate as to how much of that will flow to the bottom line, there is no fuel for the fire.

Let me illustrate: a target (say) 3 cents a share SP means a market cap $72m.. If we get to enjoy a p/e of 10-15 (huge assumption for the near term), that means a forward looking annual profit target of approx $5-7m. If we are essentially a variable cost business, that will require 12 month forward looking revenues of around $170m. If we are essentially a fixed cost business, then the 12 month forward looking revenue requirement would be in the low to mid teens. Huge variation, and clearly we are somewhere between these two extremes...and much closer to the lower end. But that requires confirmation that we are largely a fixed cost business. Over to Jeff to paint the picture.

All IMO and GLTA.