Ann: Appendix 4C - quarterly, page-226

"I even find what Dirk has to say seemingly incongruous he wrote last month the following below yet sales were only up 6%"

With respect Plough, and as Mak has referred to, I think the error in the above comment typifies the reason for much of the doubts being expressed by posters on the reliability of the figures quoted by Management in its various releases.

Cash receipts were up 6% in 4Q17, not sales. It will be months before there is any indication of what sales were achieved in the quarter, and subsequent cash received.

A contributor to those doubts I believe is the lack of understanding that figures relating to the sales process are reportable at three levels.

(1) Sales - contracted amounts agreed with customers and recorded in order books prior to chemistry toll manufacturing.

(2) Revenue – the contracted value of chemistry that has been manufactured, invoiced and delivered to customers.

(3) Cash Receipts – banked amounts paid by customers for delivered chemistries.

There would be significant time delays between each of these levels, most likely in the order of months.

Moving from (1) and (2) would require raw material delivery to and fitting into a toll manufacturer’s processing program, followed then by delivery of the manufactured product to the customer.

The time delay moving from (2) to (3) will be determined by each contracted terms of payment, and would be longer for late payers.

It is clear that in most of its past commentary and growth comparisons Management has been referring to newly contracted sales figures readily available to it.

Discussion on the HC forum generally has accepted that any revenue reported for one quarter will not appear as cash in the bank until the next quarter. A similar time allowance is likely to be necessary for converting contracted sales into revenue. If so, this means that our expectations should allow a six-month lag between initial sales order book entries and cash appearing in the bank.

It is worth pointing out that cash receipts for the 12-month period to June 2017 totalled A$22.7M. If a six-month time lag is accepted as likely, this means that total sales booked in CY2016 were around this amount, which would be US$18M at today’s exchange rate (a familiar figure).

To repeat a point that I had made in a previous post, I think Management is receiving some unwarranted flak as a result of posters not fully allowing for some of the operational and financial intricacies involved.