Fellow shareholders. Previously I have urged others to vote on the remuneration report at the AGM. As far as I could tell, almost no-one bothered to vote or actively voted for the REM report.
As stated previously, this is not an expressed view of the office holder's remuneration, it is a mechanism that allows shareholders to spill the board of directors. It is either that or a section 249D notice to remove a board member given by at least 5% of shareholders votes.
For now, I would like to put forward a case that the current trajectory is unsustainable and leave the issue of who would be put forward to replace which board member for another time.
Since July 1st 2019, the board has:
Raised $5.75m
Lost $5.3m (projected to EOFY 2023. See projection below).
To increase Revenue by $2.3m
Andincreased annual lossesby $381k p.a over this 4 year period. (projected to EOFY 2023. See projection below)
4 years of investment to grow revenue for a net increase in the annual LOSSES.
This is the big sticking point for me. How can we as shareholders overlook this trend.
This chart starts at July 1 2019 when Dyson took over.
Cash receipts DO NOT include Govt grants.
Operating costs and staff costs are shown separately and are cumulative.
Spiked light brown line shows CR events.
The Statutory Loss line is based solely on the Annual Reports. I have included a trend line between the annual EOFY reported losses. This is the most important line on the graph. LOSSES getting bigger as revenue increases. You can see the light brown thin line representing those quarters where the was a capital raising and the associated dotted green line for cost of capital and loan repayments etc (including capex during the year).
Shares on issue have gone from 56k in 2019 to 192k in 2023. Huge dilution of your ownership in this company.This chart starts at EOFY 2019 when Dyson took over.
Revenue includes Govt grants.
Projected revenue for EOFY 2023 includes an assumed increase in revenue based on prior years
Projected loss for EOFY 2023 includes an assumed reduced increase in losses based on prior years.
Note: The numbers displayed for FY 2023 are for the half year only- except for the EOFY projection.
I have not included Q3 2023 for the purpose of projections (based on the purchase of 3CT on cashflow)
Now with the addition of 3CT Pty Ltd they have added a revenue stream, for which we do not now how profitable it is. As far as I am concerned, we have inherited another loss making division until I have seen proof otherwise. I doubt we are going to be given visibility on the profitability of 3CT as a stand alone when it will be reported in Q4 2023 with the rest of the business.
More to the point, if the board is going to allow Dyson to apply the same capital management to grow 3CT revenues as SP3 over the prior 4 years we can expect to see further increases in annual losses.
SP3 raised $5.765m and increased annual losses by $381k over 4 years. That is the equivalent of raising $15.11 for a net increase in annual losses of $1. Does the board plan to keep this strategy going to grow 3CT? If so, more losses are on the way.
The outstanding loan for $1.1m is owed to shareholder EGP capital which has a contract date of Dec 31 2023. It is payable in either cash or shares at a 20% discount to the 30 day VWAP. Assuming the current share price of .027c, $1.1m of shares is another 51m shares or 30% further dilution.
I have no difficulty seeing this likely play out. Another 54m shares will have been added to dilute to 242m shares in 4 years. The shareholding you bought when Dyson took over will be worth pennies on the dollar. Cash in bank at end of Q2 was $2.8m.
Average quarterly operating cashflow (NOT including Govt grants)
FY 2021 -$434k FY 2022 -$437k FY 2023 -$446k (first 2 QTRS)I feel pretty safe assuming the same trend for the next 2 quarters which will put the bank balance at $2m plus whatever Govt grants are received (maybe $200k?). By paying out the EGP loan this puts the cash balance back around a little over $1m. Either it gets renegotiated or its payed out. If it gets renegotiated it will be on worse terms in the world of rising interest rates and lower risk tolerance. This is not good.
Does ANYONE see the problem here? Keep raising capital. Increase income but lose it at the same rate every year. This story only has one ending if there is not a seismic change in the capital management. As owners, we need a significant turn around in Return on Invested Capital.
If anyone is interested in getting a shareholder activist group together to explore launching a §249D notice to remove either the Chairman or Dyson as a director (not CEO) then email me at [email protected]
I have said it before and will repeat again. I do not mind making losses for a long time on growth style investments. But the investment in growth has to pay for itself by outpacing losses by a good margin. This is not happening here. It's time to get active.
MJB8410
SP3 Price at posting:
2.7¢ Sentiment: None Disclosure: Held
(20min delay)