I have kept a bit of a watch on Damstra since it listed, hoping...

I have kept a bit of a watch on Damstra since it listed, hoping for good things. I was again disappointed after the Q4 Appendix 4C result & I shared my thoughts back then for consideration by others.

I have now reviewed the FY21 Presentation & Annual Report. Things look even worse than before & here are my thoughts.

Forecast FY21 revenue was $33 – 35m (no reduction given throughout the year). Actual FY21 Operations Revenue = $27.4m. Forecast Vault revenue stated at acquisition = $8m. Vault owned over 8 months of the year so should have added $5.4m revenue to FY20 value of $19.6m making $25m. So, DTC organic growth of only $2.4m. (in fact not even that since DTC had 2 smaller acquisitions mid FY20 which should have provided some revenue growth in FY21 since they are included for full year).

The worst bit about this is, the company Presentation doesn’t even discuss what happened. i.e. is it as I have stated above or did Vault fall short or what? What caused the revenue miss?

Also, the company often presents values in its Presentations that don’t easily reference across to the Financial Reports so it’s not easy to clearly understand what is happening. e.g. Gross Profit.

Directors Risseeuw & Damstra & the CFO received respectively $585k, $730k & $410k salary cash payments. On top of this, got share based payments valued at $315k, $293k & $157k respectively, totalling $765k.

Share based payments as incentives for most companies are linked to EPS growth & TSR. From my reading of the FY21 Annual Report, 70% of DTC’s were just linked to Revenue growth. So, 3 executives pretty much gained $765k by simply growing revenue by making an acquisition (profit contributing or not) & growing revenue organically by less than $2.4m. Seems a great reward for something that doesn’t clearly link to shareholders benefit & while the company is making a big loss.

The FY21 Presentation states cash receipts = $31.7m but what’s the point of that if, due to increased cash payments, the net cash flow dropped from $4.7m to $1.9m?

Net cash flow = $1.9m, then need to deduct lease payments for offices = $3.2m Giving a cash loss of -$2.3m. Plus, Capital spending on PPE & Software development last 2 years was $7.5m & $7.1m. Is this typical going forward? Who knows. Being more conservative, say it runs about $6m, deducting that gives a free cashflow loss of -$8.3m.

Looking at it another way, this years’ Cash flow report shows the company borrowed $10m & with no acquisition spending, the cash held at year end was only $0.5m higher than at the start. Lost -$9.5m by operating, which was funded by a loan.

All this doesn’t mean the company won’t eventually become profitable but it looks to me that it’s got a lot of ground to make up & it doesn’t seem to be happening very fast. Makes it very hard to put a valuation on it.