Ann: Appendix 4C - Qtr Ended 31 March 2020, page-6

I believe some here may be investing in the wrong company.

To be out by 13% of forecast budget for a R&D business that is commercialising their technology is very understandable.

Certainty is a key thing that allows budgets to be met. When you can be certain that all assumptions in your budget preparations are accurate and can be met, you are most likely to meet your forecast budget.

I've worked on gated projects where forecast budget tolerances are 100%, 50%, 30%, 10%. As each gate is passed, the certainty of assumptions improve and forecast budget tolerances can be tightened. I've seen bucket loads of projects go over budget and are yet, considered successful. Project reviews acknowledge the uncertainty of assumptions and hindsight usually points to incorrect forecasts not inappropriate spending.

So in BLGs case, do you spend to meet your quarterly forecast budget, or do you spend to meet your business needs. Usually, any spending outside forecast budget requires management approval. Management make the judgment that the extra spend is appropriate and manageable.

A budget process requires the monitoring/management of forecasts and actuals. Each quarter, the comparison of forecast vs actuals can guide them on setting the next quarters forecast, but each quarter (one would hope) they are dealing with new unknowns that need to be forecast.

I would hope BLG don't get too hung up on being able to meet quarterly budget forecasts. Yes, budget forecasts are very important, but they are just a means to an end. Financial controls are required to manage the limited funds they have to develop the technology and deliver commercial outcomes.

I believe BLG just demonstrated there ability to act quickly to sure up funds at a very difficult time for business worldwide. They announced a fair an equitable rights issue, cut cash costs and brought foreword R&D tax rebate funding. With a successful rights issue, they immediately paid back to rebate loan. Hindsight is a wonderful thing. BLG wouldn't have known they announced a capital raise at the bottom of the market, but at least it was a rights issue, thus ensuring existing shareholders could minimise dilution.

If you want to invest in a company that can meet forecast budgets within 5%, I suggest you look elsewhere. If you understand the uncertainties/risks involved in investing in companies that can't, you may (or may not) be rewarded appropriately for that risk.