Ann: H2 FY24 Trading Update, page-34

Thanks for the well considered contribution to this thread. I'll have a crack at responding to your request for views on a share buy back to deploy some of NAN's spare cash.

In short, I think there is buckley's chance of a share buy back or for that matter a maiden dividend being initiated any time soon, for reasons set out below.

For sure, Nanosonics has an enviable and growing cash stash, but I have a strong feeling that the Board has the view that there are higher, growth oriented priorities into the medium term for deployment of some of the current cash reserves, which they believe will ultimately provide better returns for shareholders than a share buy back or commencement of a dividend stream.

Some of those growth priorities likely include:

1) Retaining cash for financing any synergistic acquisition opportunities that may emerge. This has been flagged by the Board as a possibility for several years now.

2) Retaining cash for developing new business systems or enhancing existing business systems in the enterprise (eg the development of the new Enterprise Resource Planning system which I suspect has now been completed at a not insignificant cost, that should become more apparent in the forthcoming Annual Report).

3) Coris launch and marketing costs during FY25

4) Coris inventory build up during FY25 and FY26, which could be quite a significant expenditure item for the company.

While we may well be over the hump for the time being on R&D spending, whether that remains the case will depend on whether the Board sees merit or strategic opportunity in further developing and potentially commercialising some of the other technology applications that have been developed and patented by the company in recent years.

With all of that being said, I have to admit that for some time I had been keen to see a modest dividend stream initiated by the company to augment the clear (and supported by me) primary focus on expenditure for growth. However, even though the company had exhausted all of its offsetting accumulated losses against its tax liabilities on profits by FY18, my expectation that a tidy parcel of franking credits would have been accumulating since that time was recently set straight for me by the company.

In that regard, it was pointed out to me that until FY23, in every financial year after FY18 whenever the company had a taxable position in Australia, the R&D tax incentive had fully offset all tax liabilities payable to the ATO. FY23 was the first year in which the company's R&D tax incentive payment was insufficient to offset all of its tax liability in Australia. So, a modest tax payment was made by the company to the ATO for the first time in February 2024 and a very modest start was made to the company's franking account. In that context, and against that background, I have been happy to defer my desire to see a maiden dividend initiated until such time as the company's franking account has developed a bit of bulk to it.

Anyway, there you have my two bob's worth on the likelihood of either a Nanosonics share buy back, or its "competing cousin", a maiden dividend.

zeno9