Pharmazen

[Breezy]

As an accountant, I find deliberate concealment of relevant financial information abhorrent and completely unacceptable.
There is no reason that proper half yearly financial statements cannot be provided to all shareholders.  For goodness' sake, we have computers and accounting systems that do a lot of the donkey work these days, this is not rocket science.  Insiders can trade all year on inside information while everyone else is in the dark until whenever they choose to eventually release their annual financial statements.

How this can possibly be seen as a level playing field is beyond my comprehension.  If the directors ever want to be taken seriously by the market, they need to start complying with best reporting standards of the NZX, regardless of the super lax unlisted requirements.

Everyone seems laser focused on the potential for increased sales and not much thought is going into the huge increase in wages, interest costs and depreciation involved with all this new plant and equipment.  Only time will tell how this all translates into future eps growth and to what extent.  I think the indications provided regarding Q1 and Q2 trading is the first insight shareholders have got that just having new plant up, running and operational does not necessarily automatically mean eps will grow. Apart form the serious lack of disclosure the issue as I see it is, the current historic metrics are extremely demanding, (as previously noted), and super high growth in eps for several years is already baked into the current share price.  That growth might happen, or maybe eps growth will disappoint, time will tell.

Dont make this stock your next OCA/HGH/FPH etc etc, things never seem to go well when that occurs, time will indeed tell and that time is not now.

[Basil]

Not intending to Breezy.  Just a note of caution that just because sales go up that often doesn't translate as well as some might expect, to the bottom line. 

[lorraina]

As an accountant, I find deliberate concealment of relevant financial information abhorrent and completely unacceptable.
There is no reason that proper half yearly financial statements cannot be provided to all shareholders.  For goodness' sake, we have computers and accounting systems that do a lot of the donkey work these days, this is not rocket science.  Insiders can trade all year on inside information while everyone else is in the dark until whenever they choose to eventually release their annual financial statements.

How this can possibly be seen as a level playing field is beyond my comprehension.  If the directors ever want to be taken seriously by the market, they need to start complying with best reporting standards of the NZX, regardless of the super lax unlisted requirements.

Everyone seems laser focused on the potential for increased sales and not much thought is going into the huge increase in wages, interest costs and depreciation involved with all this new plant and equipment.  Only time will tell how this all translates into future eps growth and to what extent.  I think the indications provided regarding Q1 and Q2 trading is the first insight shareholders have got that just having new plant up, running and operational does not necessarily automatically mean eps will grow. Apart form the serious lack of disclosure the issue as I see it is, the current historic metrics are extremely demanding, (as previously noted), and super high growth in eps for several years is already baked into the current share price.  That growth might happen, or maybe eps growth will disappoint, time will tell.

PAZ's first half ends at the end of this month.The first half result is usually announced in August. 

[Basil]

All they give you after the half year is sales and EBITDA and a brief commentary.

[Breezy]

All they give you after the half year is sales and EBITDA and a brief commentary.

What does it matter, we know the half year will be down as we have been told already it will be, no one continuing to hold is looking for anything much from the upcoming half year, its all about this time next year and beyond. Until then there is little to say or discuss other than those that want to downramp out of boredom.

[Basil]

I feel your frustration mate.  Please understand that as an accountant I find it extraordinary they only share a brief overview of operations, (missing important information) at the half year point.  That said, its within the rules of the Unlisted market so fair enough if you and others are happy with that.  Good luck with it.

[Sideshow Bob]

I feel your frustration mate.  Please understand that as an accountant I find it extraordinary they only share a brief overview of operations, (missing important information) at the half year point.  That said, its within the rules of the Unlisted market so fair enough if you and others are happy with that.  Good luck with it.

IMO they should aspire to better and look at best practice. If their longer-term target is a NZX/ASX listing then should work towards the required levels of reporting and disclosure - not minimum within the USX rules.

Could understand much of the focus has been elsewhere with Covid/capital work, but understand and share the frustration.....

[Minimoke]

I feel your frustration mate.  Please understand that as an accountant I find it extraordinary they only share a brief overview of operations, (missing important information) at the half year point.  That said, its within the rules of the Unlisted market so fair enough if you and others are happy with that.  Good luck with it.

I'm not happy about that. And I expressed my view to the Chair.

[Breezy]

There we go, down to 20c so below my 25c prediction. Cibus fund won't be happy being down 50% from near 3 yrs ago when they got their shares at a heavy discount to market at the time, doubt they will be looking to get any of their capital back for a lot longer than they anticipated. Hopefully they are turning the heat up to make increased production and productivity the focus from now.

[Basil]

Just posting this as a public service announcement for those that don't know or don't recall the difference between different classes of shares and the possible implications for the company if they had to be redeemed for cash.

Cibus were issued convertible redeemable "Preference" shares on very special terms, not ordinary shares.  This gives them preferential rights to ordinary shareholders as well as a range of other conversion or redemption rights not fully disclosed, (probably because they are "commercially sensitive").
https://usx.co.nz/uploads/paperclip/documents/2207/original/Additional_Market_Information.pdf?1612298553
Clause 3 is interesting.  It turns out since then some things have definitely not been under the control of the company.

Have a look at page 40, the audit report of the 2021 annual return.  https://usx.co.nz/uploads/paperclip/documents/2527/original/FY21_PharmaZen_AR_FINAL.pdf?1651176849
In certain circumstances these redeemable preference shares are redeemable for cash or may be exercised based on the market value of the ordinary shares.  This is why they are classified at a term liability in the balance sheet, not as equity.  The fact that they are a term liability in the balance sheet tells me the prospects of them being redeemed for cash $14m plus interest and possibly, penalties, is a very real chance of happening at some stage.

To the best of my knowledge the exact terms of those covenants and the terms under which their preference shares may be redeemed for cash have never been disclosed to the market but as usual the directors will know them and are happy to keep minority shareholders in the dark.

Cibus are part of a huge fund and I believe they wrote themselves into a very strong and advantageous position with these preference shares.
In addition to their right in certain undisclosed circumstances to redeem these shares for cash they clearly have the power to convert them at some stage within 7 years of issue based on the market value of the ordinary shares, (not the fixed 40 cent issue price), so there are potentially future implications there for share dilution.

The whole issue, the way they went about it, the murkiness of the terms of these redeemable preference shares and in particular the way the director's cut ordinary shareholders completely out of the loop in terms of subscribing for new shares was something I found really off-putting in 2021 and was the catalyst for me to reevaluate my position. 

Just reiterating, I really do hope this works out for shareholders, but this is definitely not something I want to jump back into.

[Breezy]

Buyers stepping up at these ridiculous bargin prices. PS-Cibus will do nothing until they see all the new plant up and running at its full potential, they did due diligence before buying in and would know more than anyone the huge potential gains here.

[lorraina]

https://usx.co.nz/uploads/paperclip/documents/2860/original/ASM_Presentation_Notes_from_Craig_McIntosh.pdf?1688361498

[winner (n)]

How much current shareholders going to be diluted with capital injections?

Even after the Tawhiri 1 sale and lease back we still have a book value in excess of $20m in land and buildings. Until interest rates reduce, it's not a great time for selling property, so we are not considering a sale of any further land and building to fund expansion at this stage. However, we maintain dialogue with Cibus regarding getting any additional funding from them. They have their share options, however price performance isn't where they would want to exercise those options. We also regularly talk with strategic partners that might be worthwhile bringing in however we have as much debt as we would like to carry, so the future direction is more likely to be from equity introduction or sale and lease back rather than debt.

[Breezy]

How much current shareholders going to be diluted with capital injections?

Even after the Tawhiri 1 sale and lease back we still have a book value in excess of $20m in land and buildings. Until interest rates reduce, it's not a great time for selling property, so we are not considering a sale of any further land and building to fund expansion at this stage. However, we maintain dialogue with Cibus regarding getting any additional funding from them. They have their share options, however price performance isn't where they would want to exercise those options. We also regularly talk with strategic partners that might be worthwhile bringing in however we have as much debt as we would like to carry, so the future direction is more likely to be from equity introduction or sale and lease back rather than debt.

Well how long is a piece of string? Not something for you to be concerned about being a non holder or have you become a holder at the current bargin basement prices?

[Minimoke]

In the market 1/2 year update underlying EBITDA of $410k on sales of $10.3m. on sales of $10.3m. This was down on the prior year underlying EBITDA of $1.8m on sales of $12.8m.

I don't understand why sales are down. Apparently more plant came on line and there is untold demand from customers. At the very least I would have thought they would have done same sales. There was talk about raw material supply issues - but I thought that was more to do with increased capacity - not maintaining current capacity.

And very disappointingly, they lost their third new freeze dryer in a shipping accident. Fortunately covered by insurance. But this will cause at least (I suspect) a further year delay in getting Rolleston fully operational. Seems they will give it a go with 2 freeze dryers, rather than 3.

But out look remains for current year to be same as last year. With improvements after that.