By Anthony Wintle
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
