I concur with most of your points but there are some discrepancies,
In the past product was manufactured in the UK and shipped to the US but still achieved much higher margins
I am dubious as to whether the company is employing more people than the 17 or so it employed a few years ago
Massive uplift in sales as a result of trial results and growing season yields has been prevalent throughout the company's history but never quite carried through as forecasted
It is also practically impossible to ramp up the product sales price after launch and therefore unlikely that margins will improve in the future - always been a bugbear when launching their innovative products without giving them away. Premium products can command premium prices but also need to be realistically priced in order to grasp a foothold in the market
'The Company is expected to report approximately £500,000 of net cash on its balance sheet at 31 January 2014. This is a seasonal low-point for the Company, accompanied by higher than expected receivables balances related to shipment and collection timing in the first six months of the year. Net cash balances are expected to rebuild through the second half of the Company's financial year.'
higher than expected receivables will account for a portion, as will the lower margins gained as product is made here and exported thus incurring greater costs. I suspect PIM has had to give Bayer a pretty good price on Veritas as well and the company is employing a lot more people these days……hence lower margins.
however, the potential for exponential growth in sales is lurking…..
The key part of the RNS,
' Growers who have used Veritas™ in the 2013/14 main season soybean crop are achieving value through yield increases that are consistent with our pre-launch promise.'
Bayer's goal was to get their customers to plant 10% of their land with Veritas, then the farmers could see if Bayer's/Pim's claims of a %5 improvement in yield was accurate. The implication being that if the claims stood up they would roll out the use of Veritas on a much greater/all of their soyabean crop.
We really are at the tip of the iceberg of Brazilian sales if Veritas is prooved up by the farmers.
At the moment we are only talking about Bayer's customers in one province. And of the ones who are trying it, they have only used Veritas on 10% of their fields. The maths becomes very compelling if you think about the massive uplift in sales we could see over the next few seasons
My only concern with these interim results for the last 6 months is the apparent discrepancy between the uplift in turnover but the restricted reduction in operating loss
Simply put the turnover has increased (in comparison to the prior year period) by £810k but the loss has only reduced by approx. £300k - this gives the impression that either the product margin on Veritas is significantly reduced from the previous product margins of around 70% or conversely operating overheads have increased massively (doubtful in the extreme as this has been the company's focus for the part few years)
On the positive side we are moving towards profitability but hopefully the search for new business in Brazil (at possible minimal margins) hasn't been at the expense of much higher margin sales to previously established customers
I appreciate the scenario of 'a small margin on astronomical revenue' as opposed to 'high margin on minimal revenue' but I would hope there is room for both in the search for continued success
I think you are missing my point, Bugoil is also in part an alternative to neonicotinoids which are currently either banned or under review in various areas - this creates an opportunity for Bugoil to substitute (in part at least) for this 'product gap' and gain a foothold in the market targeting the pests and subsequent diseases that are targeting bee colonies without harming the bees and affecting their own immune systems
I'm fully aware of what it is and it is a natural alternative in part to neonicotinoids and therefore highly relevant to this issue and has also been proven in previous trials (going back well over 6 or 7 years) to have no harmful effects whatsoever to bees
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