I would like to explain why thisreport the AR report and CC are misleading.I will comment on things in the order they appear in the AR though this is not nesasarly the order I uncovered them.
You will notice that I makecomparisons half by half.In us we receive full reports every Q.It is easy to see short termchanges. I find comparing H1 and annual to the previousyear you miss how things are changing.So I always subtract H1 from Annual so I can see changes half to half.If you do not like this itis easy to redo.
I keep many charts on Lynasperformance.I like looking at charts to see trends.The first thing, when I finally had some time, is go to the AR to add in AR data to my Existing tables.I quickly noticed that using the 3 primary variable inputsto Earnings that Lynas should have made AUD 2.7 M Less than H1.Here is an abbreviated. Table of that data.
|
| H1 | H2 | AR |
| Delta H1 to h2. |
|---|
| 1 | Revenue | 179.8 | 183.7 | 363.5 |
| 3.9 |
|---|
| 2 | COS | -133.6 | -139.4 | -273 |
| -5.8 |
|---|
| 3 | G&A | -16.4 | -17.211 | -33.611 |
| -0.811 |
|---|
| 4 |
| 29.8 | 27.089 | 56.889 |
| -2.711 |
|---|
I was very happy when Lynas showed aprofit but this raised my concern.
Next is the auditors comments.The first time I read this I did not think anything of it.It was not till after I figured out what was going on and reading the auditors notes a second time that I caught this.
“Accounting for substantial modifications tofinancial liabilities gives rise to complex and judgmental accounting outcomesin respect of assessing whether a substantial modification has occurred,estimating the fair value of the amended facility and measuring the impact tothe statement of comprehensive income upon de-recognition. Accordingly, thiswas considered to be a key audit matter. Refer to Note A.2 and Note C.2 withinthe financial report for the amounts recorded on the consolidated statement offinancial position as at 30 June 2019 and related disclosures.”Page34 AR.
I should have Known better Auditors donot want to make waves for companieswhen they tell you to look at a note you should, my bad in not following this the first time.
Next I went to profit and lossstatements.PG 37
The 8th line down showedwhat was going on.I did some edits on this to make it clearer,pasting jumbled it.
‘ noteA.2 Net gain on extinguishment ofdebtFY 201943,434FY 20180.0’So there was a 43M item that was zero in H1 and 2018.
This item also had the following notefrom Lynas.
(1)“During theyear ended June 30, 2019 Lynas restructured its debt facility with JARE,resulting in a net gain due to the derecognition of the old facility andrecognition of the new facility as detailed in Note C.2.C.2is on page 54 people should read it.“
So if not for the JARE Results h2’19would have been worse than H1.And 2019 would have been less than2018.This is a one time itemI think it should have beennoted more clearly, obviously no one else on this board caught it,or if they did decided not to mention it which I consider dishonest. IS not the goal of this board to make investors interested in the stock have a better understanding of Pluses and minuses not just pluses? So now theTMM EPS with this included are H2 61 M / 691 shares = $0. 088 however if you subtract this one OTI then 17.6M/ 691 = 2.5 cents not a very impressive number, hardly deserving of major buy activity.The question is will any member of the press catch it?I doubt it and so far they are shouting congratulations on 50% profit increase.This is true, but hardly an indication of the long term performance of the company.
Another good question is if Nd pricesdo not rise and they show a profit of AUD 10 ~ 20 M in H1 2020 how does themarket react to that large drop in profits.60 M in H2 ‘19 to 20M in H1 ‘20.
(20min delay)
