Hi Winsonliang, on my assessment of the MarQ quarterly results, I have the following comments which ultimately point to ending June cash of somewhere between $3.0M and $2.4M.
As for MarQ, there was a drop of $988K in cash over the quarter.
Closing balance was $4.05M.
Operating cash was -ve $557K. In DecQ it was -$719K and in SepQ, it was -$126K. Overall, in 9M, it was -$1.402M.
Overall, cash in the 9 months to Mar18 has dropped (ignoring any financing activities, so including only operating and investing activities) by $2.466M.
The bigger concern is that forward operating estimates still far exceed the quarterly customer receipts. For example, the JunQ operating estimate is $5.471M - but call it $5.5M.
The H1 customer receipts averaged $6.25M per quarter, but the MarQ was $4.238M (call it, $4.25M). That's a $2.0M dip from the first half quarterly performance. I cannot therefore see JunQ customer receipts climbing appreciably by any amount and certainly, not by an amount that would render comfort for a JunQ forward outflow estimate of $5.5M. I therefore still see a -ve JunQ outcome (short of the operating expenditure being heavily over estimated at this time). Hence why ending cash will again fall significantly to what I would think could well be a sub-$3.0M figure (and this is before their upcoming CAPEX commitment of Apr18 is spent, and before consideration is given to (very likely) Sep18 and Dec18 (at a minimum) -ve quarters plus further pressure on financial and investing components. The current cash therefore will not likely last beyond year end. That's my present view.
MarQ comparisons
Column 1 Column 2 Column 3 Column 4 Column 5 0 Item MarQ est @31/1/18 MarQ act Variance JunQ est @30/4/18 1 Research & Development - 2 Product manufacturing & operating costs 5258 3522 -1736 4177 3 Advertising & marketing 15 6 -9 10 4 Leased assets 4 4 - 4 5 Staff costs 803 879 +76 897 6 Admin & corporate 360 277 -83 270 7 Other (net 5 for interest) 109 107 -2 113 8 Total operating costs 6549 4795 -1754 9 Customer receipts 4238 10 Operating cash -557
Performance to Actual (YTD – based on forward estimates provided each successive quarter)
Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 0 Item SepQ est DecQ est MarQ est JunQ est FY Est 1 Research & Development - - - - - 2 Product manufacturing & operating costs 4367 4710 5258 4177 18,512 3 Advertising & marketing 9 10 15 10 44 4 Leased assets 4 4 4 4 16 5 Staff costs 1061 905 803 897 3,666 6 Admin & corporate 140 240 360 270 1,010 7 Other (net 5 for interest) 121 109 109 113 452 8 Total operating costs 5702 5978 6549 5471 23,700 9 10
YTD actuals + JunQ est
Column 1 Column 2 Column 3 Column 4 0 Item Mar 9M JunQ est FY Est 1 Research & Development - - - 2 Product manufacturing & operating costs 13,984 4177 18,161 3 Advertising & marketing 34 10 44 4 Leased assets 12 4 16 5 Staff costs 2590 897 3,487 6 Admin & corporate 1197 270 1,467 7 Other (net 5 for interest) 328 113 441 8 Total operating costs 18,145 5471 23,616
Customer Receipts Profile
Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 0 Item SepQ DecQ MarQ (9M Mar31) JunQ – up only FY (est on 9M Mar18) 1 F18 (uplift only) 6,150 6,355 4,238 16,473 4,776 (est) 21,249 2 F17 7,779 7,277 5,167 20,223 5,824 26,047 3 Variance -1,629 -922 -929 -3,750 -1,048 -4,798 4 Delta -21% -12.7% -18% -18.5% -18% -18.4%
- JunQ customer receipts estimate based on uplift between MarQ17 and JuneQ17 repeating itself in JunQ18.
- If however this were then adjusted for the 18.5% YTD drop in receipts (but set at 2/3 of that rate – ie: 12.33%) otherwise, the potential result turns to $3.9M. Adjusting at the 2/3 rate changes the potential result to $4.187M. The arguable range therefore is between $3.9M - $4.2M. The 2/3 midpoint here is $4.1M. This is about the best that is possible here.
Even if the deterioration here is only 2/3 of the 18% variance (ie: $5.125M), then the FY change is – receipts (16,473 + 5,125 =) $21.598M, so still down 17% YoY (or by $4.449M).
This tends to reinforce the view then that CDC operating capacity (which is having to be buoyed up by the farms) is, in real terms, at or below 40% and loss making (ie: below breakeven).
This also suggests that on the most optimistic estimate (ie: receipts of $4.776M) that JunQ will return (assuming accuracy of the expenses forecast for the quarter), a -ve operating result of ~$700,000.
On the less optimistic estimate ($4.10M) however, the JunQ (same conditions) could well return a -ve operating result of ~$1.4M.
Regardless of estimate though, or how this is indeed arranged, based on their forecast of JuneQ operating expenditures, the operating cashflow will again be -ve for the JunQ, with a range of somewhere between -$700K to -$1.4M, absent the operating expenses’ estimates having been grossly over-estimated at this time (ie: one month into the JunQ).
So, ending JunQ cash which is already down to $4.05M is now likely to end up somewhere between $3.05M ($700K operating reduction, + a further $300K investing /financing outflow, at best) and $2.35M ($1.4M operating reduction, + a further $300K investing /financing outflow, set at best).
Ending June cash therefore is likely to deteriorate further to somewhere between (rounded) $3.0M and $2.4M. And this is before the CAPEX commitments of early April are to be given effect to, as well as ongoing operating weakness through Sep and Dec upcoming quarters, at a minimum.
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