One other point I meant to highlight is around IOU's no debt situation. My post was getting too long so will stick it here. This is more important than perhaps we realise given the current global economic outlook. Now is probably not a great time for growth companies – with profits still long in the future – to be holding large amounts of debt on the balance sheet (IMHO)
As trillions of stimulus dollars wash through key international economies, we all hear about inflation being on the rise – meaning interest rates will eventually follow. Bonds, savings account and the term deposits will become more attractive to investors… and interest rates on debts, mortgages etc will climb. Unprofitable companies with large amounts of debt will have to set aside more capital to service that debt, which makes the picture rather bleaker for them (this is probably why companies like Afterpay raise capital and issue convertible notes, rather than take on large debt facilities - looking at their 2020 report APT have just $4.2M in current debt... however their long term debt is $464.7M... wow. OK, I need to look into that).
That’s also why IOU’s negligible current liabilities situation, and complete lack of debt, is so encouraging to me given what might be on the economic horizon. Sure, as long as the market thinks we’re just another unprofitable BNPL player, we might get caught up in sector rotations, but eventually the financial statements should speak for themselves. Looking at the 31 December 20 Ann. 4D, we announced a Loss before income tax of ($1,159,909). Now bear in mind there were significant changes to management in that time, and thus the P&L statement shows “compliance and professional fees” of ($1,181,343). I know we can’t pretend that latter number doesn’t exist (actually – we can: it’s called doing “pro forma accounts”) but had those costs been more in line with the prior year period of ($253,412) then our loss before income tax would have been just ($231,978).
Viewed through the lens of economic inflation on the horizon, I read this as an overall equation of something like: no debt + almost profitable already = positive outlook. I'm therefore very encouraged when our CEO goes on an investor presentation and talks about delivering profitability to shareholders, not just chasing growth.
[Disclaimer: I’m not an accountant or an economist, so happy to hear other people’s views on my interpretations here which may be incorrect]
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