Ann: Annual Report, page-2

So the day has arrived with the XPL Annual Results and what an interesting read. You make your own mind up but all i can say is good luck to the new CEO.

Some highlights:

1. FUM (ex acquisitions) rose by $0.4Bn to $13.4Bn – that is a rise of 3.1% but hang on the ASX 300 rose by 6.5%. Hub FUM up 54% and NWL up 23% over the same period.

2. Cash on hand of $940k down from $4.9m last year – running on fumes?

3. Cash flow from Operating Activities MINUS $322,826.

4. Revenue was inflated by a $3.5m tax benefit from prior years. So underlying revenue from operations is only up 27% and most of that is the uplift from acquiring Aracon and DIY.

5. Company spent over $1m buying back its shares – Why? What did this achieve? Zero. In fact share price weakened when a buyback should increase prices. What a POOR capital deployment decision by the Board.

6. And this gem from the Auditors on page 68 of the annual report!!

Material uncertainty related to going concern.

We draw attention to Note 2 in the financial statements, which indicates that the Group incurred a net loss of $540,340 during the year ended 30 June 2019, and for that same year, the Group had operating cash outflows of $322,826. As stated in Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

And Note 2 from page 31 of the Annual Report - lots of ifs and buts!!

Going concern

For the year ended 30 June 2019, the Group incurred a loss after tax of $540,340 (30 June 2018: $2,503,883). During the same year, the Group had operating cash outflows of $322,826 (30 June 2018: cash inflow of $145,982). Notwithstanding this, the financial statements have been prepared on the basis that the Group is a going concern which contemplates the continuity of its business, realisation of assets and the settlement of liabilities in the normal course of business. The ability of the Group to meet operating cash requirements for the next 12 months is based upon the following factors:

● the cash base of $940,896 and the outstanding GST receivable of $3,494,950 as at the date of this report together with cashflows forecast to be generated from service fees will be sufficient to meet the working capital requirements;

● the Group expects to receive continued investor support and funding; and

● the Group has, and will continue to, initiate a number of substantial changes in order to endeavour to return to improved cash generation, maintain a positive net asset value and continue to be able to meet its debts as they fall due.

Should the Group be unable to obtain the funding as described above, there is a material uncertainty as to whether the Group will be able to continue as a going concern, and therefore, whether it will be required to realise its assets and extinguish its liabilities other than in the normal course of business and at amounts different from those stated in the financial report. The financial report does not include any adjustment relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that may be necessary should the Group be unable to continue as a going concern.

The financial statements have therefore been prepared on a going concern basis