Today management have released the HY results for FY21 and at first glance.... ouch.
Revenue down 69% and profit down 93%.
This is not totally unexpected as management have been pretty open and forth coming about how severely they have been impacted by the Covid lockdowns and travel essentially non-existant for most of the world.
However whilst sales have been slow the have been busy increasing inventories and upgrading the facilites to increase ZincClear capaicty to 5000MT per annum. The have also developed of 15 new dispersions and installed a production line to produce 250M tubes for direct and whitelabel sales. These prodcution upgrades were all funded via current cashflows which makes the 93% drop in profit worse then it is in reality.
Still a quality company with quality managment that have plenty of skin in the game with the vision to increase capacity in anticipation of the world returning to some type of normal.
27 November 2020
COVID-19 Sales Update
The Board has been informed by our US distributor that over 50% of its original 180T stock holdings in XP powder has been sold in the past 4 months. Also, the distributorwill start ordering new stocks of dispersions in December.New orders for Europe are down 55% based on the previous corresponding 5 months to November 30, as a consequence of restrictions relating to the second and third waves in ourkeyoverseas marketswe do anticipate only a small profit result for the first half FY21.
Based on feedback from our distributors, and the anticipated licence approval from the TGA,in February/March 2021,to manufacture and supply bulk intermediate sunscreens and finished bulk sunscreens for manufacturers,who lack the necessary equipment to manufacture sunscreens using our ZinClear XP powders and dispersions,to test their respective markets.
We are optimistic of a much improved profit result for the second half FY21.ANO already has stock in US and Europe to meet the anticipated increase in demand for products, with further shipments to continue throughout December.
4th September 2020: https://dumilecapital.com/2020/09/04/ano-dont-fight-the-lev/
"The blackout period is over and Lev Mizikovsky is back in the market for ANO shares. How deep are his pockets and what’s his end game?"
It appears pandemic-related headwinds for sunscreen are receding.
positive look through from Banana Boat / Edgewell which bodes well for ANO's recovery in FY21/22.
a bullish report on ANO's prospects
This may not be that significant, as I do not know what volume of product Ethical Zinc sell, but I do know it uses ANO Zinclear product.
Excellent analysis by Will Thrower on ANO's growth strategy and competitive advantage.
"The elevator pitch: Advance Nanotek is a specialty materials company based in Australia that has significant cost and quality advantages in producing certain nanomaterials thanks to a proprietary mechanochemical process (MCP) that enables desired chemical reactions and physical characteristics at room temperature, replacing the extremely high heat needed in traditional vaporization techniques with high pressure using a ball mill.
The Company generates nearly 90% of its revenue from Zinclear, a unique form of zinc oxide that exhibits superior UV absorbance across the UVA/UVB spectrum as well as superior transparency as compared to competing nanoparticle zinc oxides.
Thanks to an organizational overhaul, an operational turnaround, capital injection and capacity expansion led by a successful entrepreneur and activist investor, Zinclear is now also the cheapest and most readily available zinc oxide on the market, setting the stage for rapid market share gains and potential mass-market adoption as sunscreen chemicals come under fire for posing health and environmental risks.
The business is already highly profitable, and the stock is cheap in relation to its growth rate and long-term prospects.
Full report here: https://dumilecapital.com/?p=48
Great write-up of the FY20 results from user @WillThrower3 on twitter. Will was the author of the report I posted in my #History straw.
Hmm...I am pretty nervous about the numbers, but ANO have the benefit of the 'Lev put' (what will this cost minority shareholders?). ANO has been hit hard by COVID-19. Key takeaways:
1) Receivables over 61 days has ballooned to $3.4 M, up from $171K in prior year. A key distributor is carrying excess product and is unable to onsell it, and the company has agreed to extended payment terms, which are currently being met.
2) Inventories have ballooned to $6.4 M, up from $1.1 M in prior year. CEO reports sales will be down over the next few months as customers reduce inventory, and ANO are building up inventory in anticipation of a v-shaped sunscreen recovery by Q4 2021.
3) Balance sheet as at the end of year has $260 k in cash. Lev will support ANO's liquidity requirements. The Lev put is in place.
4) ANO has set a goal of capturing 2-3% of active ingredient market share by FY2024. SUnscreen market forecast to be $24 Billion (USD?). If 5% of the market is active ingredients, that equates to a target revenue of around $50 M - Let me know if my estimate is wrong please, as it seems a little lower than I expected.
5) Reportedly increasing competition from Everzinc. This may result in pressure on margins.???
6) Forecast for HY2021 is for it to be better than HY FY2019. No guidance provided, contrary to last year, this may mean revenue is expected to be flat FY2021????
7) 22 employees on Jobkeeper and no bonuses are to be paid, board and management wage freeze.
8) Sales up to February were running at around $2 Million per month, post February, sales slumped to $0.4 M per month.
9) ANO are expecting the sunscreen market to begin to recover by Q4 2021, and are positioning supplies and inventories for an anticipated ramp up in demand as manufacturers rebuild depleated stockpiles.
It looks pretty bleak over the next 6 months, and if there is a vaccine / or a second European wave doesn't hit hard, there may be green shoots in H2 2021.
DISC - I hold.
I'm trying to grasp whether the management of this business are completely off the chart nuts who don't care what people think (including the regulatory authorities) or are just so heads-down, bum-up in their business that they don't have time for protocol. Either way the story is difficult not to watch.
The report by Global Market Insights shows very promising market growth for Nano-Zinc Oxide, namely;
Market size increasing from US$300 mil in 2018 to over $US800 mil by 2026.
- Rising adoption in biomedical fields
- Proliferating cosmetics industry
- Opportunities: Increasing implementation in animal feeding/grazing
Increasing environmental & health issues though this contradicts a recent review by the TGA that found "on current evidence, neither TiO2 nor ZnO NPs are likely to cause harm when used as ingredients in sunscreens and when sunscreens are used as directed."
Seems like the total addressable market for ZnO derived products is likely to grow significantly over the next few years.
Summary overview available here:
Unfortunately the full report is prohibtively expensive!
Advance Nanotek announces a new patent for an antimicrobial hand, face and body moisturiser. The product contains zinc and hinokitiol as active ingredients and has been sent to MSL Solutions for testing for efficacy against feline coronavirus as they did for the mouth spray. The announcement makes no claims to be a preventative or cure for COVID19.
This announcement reads a lot more coherent and to the point compared to previous announcements.
ANO expects profit to be 2.5x higher in FY20 compared to the previous year, coming in at around $8.4 million. This is on the back of a 46% lift in turnover.
It also looks as though sunscreen manufacture has recommenced in the US and ANO says it expects an extension to the aluminium oxide supply agreement.
The market has reacted favourably, sending shares over 20% higher.
ASX announcement here
01-Apr-2018: 9:37am: ANO: Suspension Update
The war continues...
I have updated my valuation for ANO, slashing my TP, and explaining why I'm going to sell as soon as they begin trading again (assuming they begin trading again)...
27-Mar-2020: From the ASX (at 5:03pm, after the market closed): Continued Suspension from Official Quotation
In this update from the ASX (link above), they explain why they consider that a continuation of ANO's suspension from trading is appropriate. They include the query letter that they sent to ANO regarding their draft announcement regarding their new patent for various oral care products that may use various combinations (compositions) of "at least one zinc compound or at least one zinc salt and hinokitiol or a salt thereof". The ASX also include ANO's response (reply) to that query letter, and it's not hard to understand why the ASX regarded the ANO reply as lacking in detail and not adequately addressing all of the questions that the ASX had asked.
Just one example:
"Please advise whether ANO has received any legal advice regarding the statement in the Draft Announcement that: “The initial sales are contemplated on the Amazon EU platform as no regulatory approvals are needed.” If it has, please provide a copy of the advice (not for release to the market). If it has not, please explain its basis for making this statement."
Hmmm. Perhaps they didn't read the whole question?
The ASX felt that they needed to release this announcement (link above) in response to ANO releasing their ANO Business Update announcement the previous day (2:20pm on 26-Mar-2020) in which they do make assertions about the ASX that the ASX clearly felt they needed to address.
Apart from the spelling and punctuation errors in the last line of ANO's response to the ASX - "The balance of information sort by the ASX is in the opinion of the Board is not material." - ...the wording is dismissive and provocative. I think they'll find that they won't get out of this trading suspension until they provide satisfactory answers to the ASX and let the ASX decided what is and is not material.
Another fine mess they've got themselves into. Such promising tech, and such a badly run company - from a communications and regulatory compliance point of view.
18-Mar-2020: If anybody else has posted a straw about this, I haven't seen it. Both ANO & AIR are currently suspended from trading, following a call on Monday for a trading halt, pending further details of a patent they have just filed for a novel (new) product or product range.
On Monday they talked about "a highly progressed opportunity regarding the development of Oral Care Products (New Products) which could prevent the coronavirus cells multiplying" , but by yesterday they had corrected that to:
“The patent is looking at a range of oral care products that could inhibit the replication of the novel coronavirus inside the cells of the oral cavity / mouth”
So - slow down/inhibit - instead of stop/kill. Still, that is certainly the sort of thing that DOES require a trading halt or suspension until they are in a position to provide further details (especially in THIS environment), so they've done the right thing for sure.
Apparently, AstiVista (AIR) brought this to ANO's attention, and they are approaching it as a joint venture or partnership, with the details of how that works being just one of the things they needed to iron out. Lev, Geoff and Rade are all directors of both boards (ANO & AIR) with one additional director (Laurie Lefcourt) on the ANO board, so the companies are pretty much on the same page you would imagine. Lev is the Chair of both companies.
Similar announcements have been released by both AIR & ANO, but the full details of this opportunity will be released either after market today or some time tomorrow (I imagine) and they should both recommence trading after that release.
Looking forward to reading more about this!
Feedback from US distributers is that brand owners and retailers are not building up inventory for the summer season as there is a reduction in holdiay bookings.
ANO is shipping additional poweder and dispersions to an FDA approved warehouse for a supplier Deveraux Speciatlies to have available to distribute to Canada.
This suggests that there is not currently buyers for existing stock. A proposed capital reduction of up to 7c per share perhaps sounds like a desperate attempt to prop up the share price especially since there was a rights issue very recently and now there seems to be so much money that ANO will propose to give it back?
Corona virus will be temporary and we don't really know how bad it will be. Potentially there will be a northern hemisphere summer season of low sales which would mostly impact this years and next years revenue and profit numbers for ANO.
This will pass.
Investors with a longer term view may well find a buying opprotunity but it is hard to know where the share price could go in the short term.
It is tempting to accumulate a small amount here around $4.50 with a longer term view.
A hard decision to make as better opportunities could present if there is a broad larger market sell off and I want to keep some cash on hand.
Interim Financial Statements
For the Half Year Ended 31 December 2019
Advance Nano Tek Limited result for the half year ended 31 December 2019 was net profit after tax of $3.366 million. The Company has recorded a profit before tax of $4.818 million which is 2.77 times greater than the corresponding half year ended 31 December 2018. Sales revenue for the 6 months to December 2019 is $11.307 million compared to $4.743 million for 6 months to December 2018. ZinClear XP powder sales are up 4.6 times compared to 6 months December 2018.
During the past 6 months, the Advance Nano Tek Limited has received TGA approval on the Brisbane manufacturing facility.
The tax expense of $1.452 million for the half year ended 31 December 2019 is not payable in cash due to the utilisation of prior year tax losses.
ANO is in the early stages of a feasibility study to leverage the capture of its CO² emissions from its zinc oxide productionequipment and convert the CO² into oxygen through the growth in hydroponics, on site at Shettleston Street Rocklea. We are witnessing a reduction in our energy consumption with the installation of our solar panels completed in December 2019. We will look to utilise this solar energy and battery storage as part of our hydroponics feasibility study.
Review of financial position
The net assets of the Group have increased by $3,361,168 from 30 June 2019 to $21,689,857 at 31 December 2019. A loan was obtained from entities associated with Mr Lev Mizikovsky totalling $1.1 million during the half year ended 31 December 2019to assist the group with working capital requirements and has been repaid in full subsequent to 31 December 2019.
Directors' Report For the Half Year Ended 31 December 2019
The Group has adopted AASB 16 Leases from 1 July 2019. This has resulted in right of use assets of $3.170 million and $3.191 million in lease liabilities being recognised on the balance sheet at 31 December 2019.
Significant changes in state of affairs
There have been no significant changes in the state of affairs of entities in the Group during the half year.
Dividends paid or recommended
No dividends have been paid or declared during the financial half year.(31 December 2018: Nil)
Events after the reporting date
The loan owing to entities associated with Mr Lev Mizikovsky totalling $1.1 million was repaid subsequent to 31 December 2019.
Advance NanoTek Limited has completed a capital raising on 17 January 2020. The Company raised $3.945 millionandissued 682,444 shares on 24 January 2020.
On 2 January 2020, the company completed a share buy-back of 6,678 shares for $37,797.48 from employees no longer entitled to these shares in accordance with the terms of the company’s employee share scheme.
Except as above, no matters or circumstances have arisen since the end of the financial half year which significantly affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years.
Came across this article. Not sure who wrote it but it provide some great insights into how the company got to where it is today, the management team, competitiors and addressable market.
Well worth a read.