Ann: Activities Statement and Appendix 4C, page-5

There are only a couple of good items to report in a long list of bad.
As the company has announced there is revenue growth. This is the biggest tick on this report. As there has been no acquisitions this growth has all been organic. A couple of new products maybe, and getting the portfolio of products ranged in a greater selection of stores. Well done.

But the costs blow out is accelerating. The company has announced that cost of materials and freight has impacted this quarter. There is no end to that or mitigation provided so id suggest that is the new normal if not worse. For comparison to last years full year YTD date figures this year 1.2b Product manufacturing costs are 81.4% of receipts compared to 65.8% last year. That is an additional 15% + of materials, transport, utilities costs not being reflected in the final sale price of the goods.

Labour is also a bad news story with this years staff costs 1.2e at 49.3% of receipts compared to last years 39.7%. Approximately 10% increased against last year and the worst news in that minimum wage has increased by 5% starting in the next quarter. So without a mitigation in place we can expect this to be further impacted in line with material cost increases at 15% increase.

As a result of the two above key items the 1.9 Net cash result is a loss of 41.3% compared to 14.9% last year. In dollar figures this company is now making a loss 41c for every dollar earned compared to 15c last year. That’s almost tripling the loss!

the final quarters loss was supported slightly by a 200k government grant at 1.7. without the grant this quarter cash burn would have been 1.225Mil. The highest quarterly loss. A year ago quarterly losses were averaging 260k now they look set to be over 1.2mil per quarter and rising. The next quarterly loss should be 1.4M accounting for labour cost increases and no 200k government grant.
With a total funds available at 4Mil and burning 1.4Mil with further acceleration a quarter I retain my original stance on this company that they will raise capital before the end of the year. Its possible that it gets stretched to Jan ’23 but the board would be spending a lot of time on solvency calculation accuracy post Dec ’22.

The current strategy of raising capital to buy shelf space and extended ranging with below cost sale points has eroded investors capital over the past 12 months. Share price has decreased from 70c to 21.5c with a low of 17.5c. A shift in strategy is needed here as there is very little to make anyone believe that your investment can be greater over the next 6-12 months with worsening costs and a capital raise.

On the positive the change in packaging presented in this update and previously for mash and gravy looks like it might get the deal done with Woolworths. That will support company growth over the medium term if successful.

There is also some positive cost management in the overheads which are being kept inline with top line. But admin and corporate costs have risen against revenue which at 24 months post listing and 42% revenue growth you’d think it should have dropped a little as a percentage.

Share price currently reflects approximately 25-30% over value IMO. This could see 15c in the next 6 months with a high of 25c temporarily if mash and gravy is successfully launched. Good buying sub 18c and selling over 22c