Harvesting The Numbers!

By Anthony Wintle

 

HMI Name and logo

An Accounting outlook of Harvest Minerals

Below are the actual results already published for 2018 and my conservative forecast for 2019, Here I share an accounting opinion on the company both based on known data and projected data. Some caveats to this are naturally derived from the companies ability or inability to beat the market’s expectations or indeed fall short, I believe much of the recent disappointment is priced into the current share price.

Dec-18 % of sales Assumptions
Revenue 1048062 Variable
COS 418738 39.95% Variable
Gross profit (operating margin) 629324 60.05%
Listing expenses 21026 2.01% fixed
Accounting and audit 61895 5.91% fixed
Consulting (this is staff costs) 665157 63.47% fixed
Directors exp 345626 32.98% fixed
rent and rates 90057 8.59% fixed
marketing 116075 11.08% fixed
legal 17866 1.70% fixed
impairment 486257 46.40% one off
share based payment 472275 45.06% one off
Travel and accommodation 103026 9.83% fixed
wages 116265 11.09% fixed
fx -175025 -16.70% omitted from forecast
depn 572 0.05% fixed unless CPR is issued
other exp 107626 10.27% fixed
bank charges 25 0.00% fixed
total overheads and misc exp 2428723 231.73%
Profit before tax -1799399 -171.69%

 

Forecast Dec 19 @ 160ktpa % of sales
Revenue 8,800,000.00
COS 3,515,912.61 39.95%
Gross profit (operating margin) 5,284,087.39 60.05%
Listing expenses 21,026.00 0.24%
Accounting and audit 61,895.00 0.70%
Consulting (this is staff costs) 665,157.00 7.56%
Directors exp 345,626.00 3.93%
rent and rates 90,057.00 1.02%
marketing 116,075.00 1.32%
legal 17,866.00 0.20%
impairment 0.00 0.00%
share based payment 0.00 0.00%
Travel and accommodation 103,026.00 1.17%
wages 116,265.00 1.32%
fx 0.00 0.00%
depn 572.00 0.01%
other exp 107,626.00 1.22%
bank charges 25.00 0.00%
total overheads and misc exp 1,645,216.00 18.70%
Profit before tax 3,638,871.39 41.35%

 

Below are the workings used to produce the 2019 forecast

workings $
Revenue 2018 $ 1048062
Revenue 2018 Units (T) 19056
Selling price per unit 55
COS Per Unit 22
Margin per unit 33
Total fixed overheads and other fixed costs 1645216
Break Even In Units (T) 49816
Deficit From Break even in unit (T) 30761
% Increase in sales needed to break even 161%
Sales forecast (Production as per plant 320ktpa less 50%) AKA 160ktpa 8800000
COS at expected sales level 3515913
Gross Margin at expected sales 5284087

Gross Margin and Break even

The very high Gross margin per unit means that contribution towards overheads is significant enough that the break-even is relatively low. Based on the figures to date, the break-even in units is roughly 49816T per annum.

Forecast

The company has forecast that production of 320ktpa is achievable, based on sales to date it is unlikely that all produced fertiliser will be sold and as such, I have discounted the sales as 50% of what can be produced. At roughly 160ktpa we would see full abortion off all overheads and a profit of roughly $3.6 million, at a PE of 10 we would expect a Mcap of $36 million.

As it stands there is clearly a lot of upside and potential for in excess of $36 million mcap if sales can be pushed throughout 2019, maximum mcap of $120 million mcap could be achieved if sales make up 80% of potential production.

The upside here is huge and with no need to raise funds the company is in a unique position to offer organic upside with low risk of dilution.

I have recently been suggesting companies in the current market environment that you can safely invest in, these being companies that will be profitable in the near future and have no near-term funding requirements.

“The big risk here is if sales are not achieved. On the flip side, the upside is also based on sales being achieved.”

I hope you have all enjoyed this article and feel free to comment on twitter with any questions, you can follow Anthony by clicking here 

Anthony Wintle in this article intends to evaluate the future profit or loss of Harvest Minerals he is actively employed as an accountant, dealing with KPI’s, P&L, BS and all management accounts for a large multinational company, Anthony commented:  I am well placed to evaluate accounts of companies and have done so successfully for a number of years. I have made significant gains in the stock market via my research and evaluation of companies but provide the above data for illustrative purposes only with TMS taking no responsibility for the data provided in this article.

Please do your own research.

Chief operating officer (COO), Mark Heyhoe speaks to IGTV

The author was not remunerated for this article but is a shareholder in the company

 



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