Fundamental Risks24 Apr 2023 17:02
The problem for many is they get impressed by what appear big numbers. This leads some to believe that success is certain when it very clearly isn't. Lets look at the facts:
£2.4m of orders
The problem here is three fold with this:
1) Until Chartwell can assess, get approval and then implement its plans delivery is a blockage. Unless you can fulfil orders then they are for nothing
2) Although it is a good start (see 4) they need much more to become profitable. They lost £2m on £7.5m revenue last FY so can you tell me what they need to achieve to break even? (If you said £9.5 please go to the back of the class because you're clearly an idiot). Now, factoring that in what increase is need? How many additional tests does that equate to?
3) Sales growth in the US is very very slow and the sales side has not been given any attention (I.e a decent sales strategy)
4) In Jan 0223 they reported an order book of 2.5m - Now, the question to be asked is how much of the £2.4 are "new" orders and those carried from Jan? Imagine if for example they had not received many new orders (sub 250K) and now had an order book of 2.4? That would mean a woeful fulfilment amount that would seriously jeopardise that order book being retained (because if you can't fulfil then you have to accept cancellation in most cases).
£2.5m Government settlement
1) They will not be getting a "seven figure" counter settlement. That is just nonsense spouted as a defensive mechanism going into negotiation. Nothing in the contract provides compensation for loss. Even this government are not that stupid.
2) This leaves what is under negotiation - payment of the £2.5m of taxpayers money provided to ODX to help them provide something they failed to deliver. They dropped the ball in getting test approval and they carried out some packaging work (hence the staff) but that didn't pay well enough to stem losses.
3) Best case is they keep the £2.5m. Anything but that comes off the current bank balance. I don't think they will pay it all back but the dispute is a negative, not a positive, until settled.
£1 million royalties
1) Again it is looking at the terms which none of us have access to. However, for anyone with an ounce of business experience (rare around these parts) it will be related to sales and other potential performance metrics. We do not know if any have been paid yet, despite us being 6mths ish from sale
5 million in the bank.
1) In November 2022 they had a balance of 6.5million meaning that with normal sales invoices etc they have spent 1.5million. Now, some of this can be accounted for in the general inflow and outflow of cash in any business. But it is still a significant sum of money.
2) They have some significant costs to get production and sales up. Sooner or later Capex is needed before it is too late.
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