Ann: Profit Guidance, page-18

I don't think I expressed myself very well in my 10 July 2021 Post #: 54412945. What I tried to say is of great significance to OCL investors, so here is another attempt to get this message through:

R&D expense has rocketed up by 46% from $15.74M in FY20 to $23M in FY21. Investors would be wise to think about the implications of this.

Imagine being at the Executive/Board Meeting discussing this. One opposing group (to the much higher R&D spend) might have said: “No, let’s keep the already very high rate of R&D at last year’s level and move that proposed increased spend to EBITDA instead. This would result in OCL reporting a 91% increase in EBITDA instead of only 49%”.

IMO, if OCL had not increased R&D, NPAT would also have gone up by a similar percentage of around 90%. This would have demonstrated that OCL was in a new period of much faster growth. The market is not so stupid with the very high P/E it has awarded to OCL. This P/E would have been very much lower if OCL had kept R&D spend at FY20 levels.

It is extraordinary that OCL can generate so much extra cash that they have the luxury of increasing R&D by 46% and fully expense it while still reporting an EBITDA increase of 49%.

Clearly, in making its decision on R&D spend, the Executive/Board can see the future growth they can capture by improving their offer, as well as a very high return on investment. This is a very good sign for the future of OCL.