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 |
| 1 |
Item
|
MarQ est @31/1/18
|
MarQ act
|
Variance
|
JunQ est @30/4/18
|
| 2 |
Research & Development
|
|
|
|
-
|
| 3 |
Product manufacturing & operating costs
|
5258
|
3522
|
-1736
|
4177
|
| 4 |
Advertising & marketing
|
15
|
6
|
-9
|
10
|
| 5 |
Leased assets
|
4
|
4
|
-
|
4
|
| 6 |
Staff costs
|
803
|
879
|
+76
|
897
|
| 7 |
Admin & corporate
|
360
|
277
|
-83
|
270
|
| 8 |
Other (net 5 for interest)
|
109
|
107
|
-2
|
113
|
| 9 |
Total operating costs
|
6549
|
4795
|
-1754
|
|
| 10 |
Customer receipts
|
|
4238
|
|
|
| 11 |
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 |
| 1 |
Item
|
SepQ est
|
DecQ est
|
MarQ est
|
JunQ est
|
FY Est
|
| 2 |
Research & Development
|
-
|
-
|
-
|
-
|
-
|
| 3 |
Product manufacturing & operating costs
|
4367
|
4710
|
5258
|
4177
|
18,512
|
| 4 |
Advertising & marketing
|
9
|
10
|
15
|
10
|
44
|
| 5 |
Leased assets
|
4
|
4
|
4
|
4
|
16
|
| 6 |
Staff costs
|
1061
|
905
|
803
|
897
|
3,666
|
| 7 |
Admin & corporate
|
140
|
240
|
360
|
270
|
1,010
|
| 8 |
Other (net 5 for interest)
|
121
|
109
|
109
|
113
|
452
|
| 9 |
Total operating costs
|
5702
|
5978
|
6549
|
5471
|
23,700
|
| 10 |
|
|
|
|
|
|
| 11 |
|
|
|
|
|
|
YTD actuals + JunQ est
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
| 1 |
Item
|
Mar 9M
|
JunQ est
|
FY Est
|
| 2 |
Research & Development
|
-
|
-
|
-
|
| 3 |
Product manufacturing & operating costs
|
13,984
|
4177
|
18,161
|
| 4 |
Advertising & marketing
|
34
|
10
|
44
|
| 5 |
Leased assets
|
12
|
4
|
16
|
| 6 |
Staff costs
|
2590
|
897
|
3,487
|
| 7 |
Admin & corporate
|
1197
|
270
|
1,467
|
| 8 |
Other (net 5 for interest)
|
328
|
113
|
441
|
| 9 |
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 |
| 1 |
Item
|
SepQ
|
DecQ
|
MarQ
|
(9M Mar31)
|
JunQ – up only
|
FY (est on 9M Mar18)
|
| 2 |
F18 (uplift only)
|
6,150
|
6,355
|
4,238
|
16,473
|
4,776 (est)
|
21,249
|
| 3 |
F17
|
7,779
|
7,277
|
5,167
|
20,223
|
5,824
|
26,047
|
| 4 |
Variance
|
-1,629
|
-922
|
-929
|
-3,750
|
-1,048
|
-4,798
|
| 5 |
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.
