Ann: Preliminary Final Report, page-2

Yet again, DDT's new management performs strongly and this report highlights it's trading at a material discount to intrinsic value. Rather than focussing on points outlined in the report, such as the $1.2m net profit or 3% increase in revenue, I provide a few comments on things I find thought provoking and as usual, welcome any comments and feedback.

For this analysis, my dataset only goes back to 2017, reflecting the 2 full years under new management and the 3 preceding years.

The table below clearly shows revenue composition is being weighted away from sale of goods, towards towards service and licence fees; and royalties. These results indicate the lowest proportion of revenue from sale of goods, now at 60%. This was 81% in 2019. I expect the re-weighting should continue improving margins as time progresses.



Since new management has taken control, there has been a strong focus on controlling cost of sales and we now see the cost of sales in absolute terms is at its lowest, being $1.4m. This is a 12% decrease on 2020 and with the benefit of increased revenue, the cost of sales as a percentage of revenue is now 36% (a new low, and the first time this has been in the 30s).

The cost controls are clearly working, with expenses as a percentage of gross profit now also the lowest at 52%, compared to 95%, 235%, 129%, and 148% for 2020, 2019, 2018, and 2017, respectively. Hopefully we can continue seeing appropriate cost controls, without any diminishment in quality of goods sold.

Based upon comments in the Outlook section, it's good to see the business isn't resting on its laurels and has spent some time and money with R&D to improve the application processes, which is the first major improvement since the applicator was first developed in the 2000s.

As noted earlier, I believe there is a focus on moving away from the sale of goods (despite still reflecting 60% of total revenue), which to I think is reflected to an extent in the below table. Inventories have been steadily declining, with inventories/revenue reflecting a low at 5.35%. It would appear payment terms may have varied because of this move away from sale of goods and would need to be monitored over coming reports.



Long term holders will hopefully feel their pain is somewhat reduced seeing these results, and noting that due to previous losses, the income tax expense only amounts to $8,222.

All things considered, the earnings per share have increased dramatically due to the strong annual result and shares on issue remaining constant at 1,260,709,351. Given the business' history, it's understandable that this is so high, however, I'd much prefer this be drastically reduced via a buyback scheme.

There's a lot to digest, and this hasn't even touched on DDT's partnership with PropertyVAULT...

I reiterate my earlier comments welcoming feedback and additional commentary/thoughts.