Ann: Envirosuite Reports Q2 FY2021 Sales Update, page-47

I would not expect a large portion of these to be specific one-off costs, however my understanding is that this should indeed be reduced (note below from slide 8 of the FY20 presentation):

- Transaction and integration costs associated with
EMS business of $2.3m
- Duplicate cost base from EMS for portion of year
$8m of costs to be removed from the business in relation
to duplicate and redundant roles with additional $3m
identified from operational synergies

So that to me means $2.3m in one-off costs will not happen again, also $11m of ongoing reductions, although the duplication ($11m) was only part of the year so reducing FY20 by the full $11m would not give the correct figure either.

I note you have referenced the glass door reviews, these, to me, read like employees who have been made redundant due to these merger synergy cost savings, or have left due to the unpleasant nature of cost cutting.

However, there are other area's where there are cost increases "The cost consolidation complemented by a growth-orientated reallocation of expenditures is expected to increase group revenue growth potential as well as improve operating margins with a more agile market approach to capitalise on new opportunities." (21 May 20 release). Therefore, costs are likely to keep growing with revenue, which will slow profitability, yet hopefully will lead to additional revenue growth.

The other half of the picture, Revenue, this company is still in its infancy (in terms of commercial cycle) and management's ability to execute (in addition China launch questions) are, IMO, creating drag on the Share Price.

Significant revenue growth is required for financial sustainability, this is certainly the goal of the company and the question is whether this will be achieved. The first step on this journey is a positive EBITDA, this has been brought forward to this quarter and been re-iterated at each update, if this is not met then this would be a big loss of confidence IMO. If positive EBITDA is realised, however, this will help to build trust in management which will hopefully give the share price a lift. Of course, if this does happen this still leaves FY22 as the first probable year of positive EBITDA, given positive FY21 Q3 & 4 EBITDA is unlikely to offset FY21 Q1 & 2 losses.

Overall, this company has blue sky potential and is establishing itself in what I believe will be a growing market. I further hope it will have a first mover advantage which will place it well over the long term. This said, the company is yet to establish a reputation for execution and the ability to penetrate any of the large potential market may be slow or may never come. As with any commercialising company there are large risks and large potential rewards, and the price could move very quickly in either direction.

I hope this helps, this is all IMO so please DYOR. GLTAH.