Ann: Appendix 4C - quarterly Q4 and Commentary, page-34

In terms of the CY18 guidance, i'm a little underwhelmed but not surprised.  It was mentioned to me recently by a major holder that the board really wanted to avoid what happened in 2017.  So, even though for me US$105-115m is on the low side, hopefully it represents a figure which they are deeply confident about achieving as a minimum.  I'm underwhelmed because US$32m of this is apparently 'slippage'.  So, had that 'slipped' revenue come in in 4Q17 - do we really believe they'd be guiding US$73-83m for CY18 today?  I certainly don't.  They'd previously guided minimum 25% growth for CY18 on an expected US$90m (i.e. US$112.5m+), then subsequently appealed for understanding of revenue 'slippage' by assuring that this would simply land on top of CY18 revenue - however, it appears to have instead replaced any growth.  You can shift numbers around, but that is an unexplained shortfall in CY18 revenue ambitions my opinion.

However, in the spirit of my long-term outlook on FLC, i'm happy to move past that.  I have accused them of being cavalier with numbers last year.  Hopefully this is a sign of greater conservatism in that regard, and implicit improved certainty which that should bring.  Doubling revenue is indeed a good headline aspiration for 2018, and I hope it draws eyeballs, but I continue to believe this number should have significant upside even aside from the looming, yet unmentioned, Africa MOU*.

My other disappointment in this commentary is the lack of an updated Top 20.  This is of great interest to me, and it's absence leaves a lot of unanswered questions in my head about the true nature of the SP downtrend.  As others have mentioned today, holders are seeking certainty.  Proof that the Top 20's collective holdings had migrated closer towards 80%, or back towards 70% (last clue had it at 73%), would have been very telling.  It's absence means we are all still guessing what's really going on.  I have my theory, others have theirs.  

Positives for me were movement from PDVSA, Stanford plant is operational, China MABR deals expected between March and June, SUBRE almost commercially ready, LatAm looks pretty strong ey?, the US$4.1m Nirobox tender win in Africa (anyone?), more Nirobox deals to close in Q2 in North Africa, and - surprisingly - Q2 decisions on South Africa desal tenders?  The majority of the Cape Town tenders have been awarded, although someone did recently tell me we had a link to Umgeni, who Govt Minister Moukonyane seems to have agreed a plant for (controversially) outside the City of Cape Town's tender process.  I guess we wait and see.

The potential delay in Baja California is, sadly, very real.  The congressional sitting in Dec which approved the state funding for the desalination PPPs has been called into question by political opponents of Governor Francisco Vega de Lamadrid (who is behind the plants) - as allegedly opposition were given as little as 30 minutes notice and many could not attend the session.  The Supreme Court (SCJN) admitted the complaint and is now reviewing the constitutional legitimacy of the session, and therefore the funding.  One headline I saw suggested this could take 3-6 months.  I can't be sure though, so feel free to do your own digging.

I wonder if the SP would be somewhere different if we'd announced all of the little wins in LatAm, Africa Niroboxes, Stanford operational, PDVSA movement?  No doubt that'll fuel some more conspiracy theories, but maybe it's just the new normal for holders of a global company who want to get on with it and update us at set time of the year like this.

*Negotiations slated for Q2, with a possible revenue boost of US$35m in 2018, and US$65m in 2019.  That would provide wonderful certainty for investors going forward and hopefully help our valuation by the market.  

With US$33m cash we are looking quite healthy for a company which closed yesterday with a MC of under US$145m.