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CODEIFAI LIMITED — Interim / Quarterly Report 2020
Jul 30, 2020
64630_rns_2020-07-30_b5460c39-8566-4194-80f1-49f922418f29.pdf
Interim / Quarterly Report
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ASX ANNOUNCEMENT ASX:YPB | 31 July 2020
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Q2 2020 net operating cash use improves by 21%
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Q2 2020 net operating cash use 21% lower than Q1 2020
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Cash receipts down 27% on Q1 2020 due to COIVD-19 impacts
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Gross margin in excess of 95%
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Gross operating costs down 22% on Q1 2020
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COVID-19 disrupted normal and new business
Product authentication and consumer engagement solutions provider YPB Group Limited (ASX:YPB) presents highlights of activities for the quarter ended 30 June 2020 (Q2 2020). Q2 2020 saw pleasing continuation of the trend of lower cash use by the business driven by ongoing tight cost management and further cost initiatives. COVID-19 impacted cash receipts negatively in the quarter.
Further financial improvement
Net operating cash use by the business improved to be 21% lower in Q2 than Q1 at $0.559m. This was primarily driven by lower cash costs.
Cash receipts fell by 27% on Q1 2020 to $0.151m primarily due to COVID-19 disruptions to various customers’ ordering patterns. An improvement is expected in subsequent quarters although timing remains unpredictable and recovery may be Q4 weighted.
Cash gross margin for the quarter was above 95%. The nature of the present product suite means that high gross margins are likely to be sustained. That implies that the direct profit contribution of incremental revenue will be substantial. This profit leverage to revenue growth is a key plank in the company eventually achieving profitability.
Q2 2020 gross operating costs were 22% or $0.201m lower than Q1 2020. This was the primary contributor to the lower cash use in the business, more than offsetting the lower receipts. It was driven by a 35% or $0.191m fall in staff costs in Q2 from Q1.
A voluntary COVID-19 plan saw those able take a 50% salary cut for the three months 1 April to 30 June 2020. There were also a number of redundancies in the period. H2 2020 staff costs will rise as normal pay resumes but approximately 35% of the Q2 staff cost reduction will be permanent i.e. H2 staff costs should remain 15% below those of Q1.
Directors have also foregone Directors’ fees from 1 April through 31 December 2020.
COVID-19 disruptions but with technical progress
COVID-19 impacted both recurring and new business in both Q1 and Q2 2020. Normal activities were difficult and customer ordering patterns were disrupted. Staff largely worked from home over the period. Although “normal” remains elusive, stronger H2 cash receipts are expected in the current budget, although weighted to Q4.
Despite COVID-19, Nature One Dairy implemented Connect on its production line and first product bearing YPB’s technology is now on Coles’ shelves.
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Very important technical progress was also made in Q2 with the development of Android for MotifMicro as part of the new generation MM app (as announced on 27 July 2020).
Recordings of a recent webcasts where YPB’s CEO and Executive Chairman, John Houston, discusses the Company’s activities during the quarter can be accessed on the Company’s website at the following links:
Corporate Matters and Funding
As of 30 June 2020, the Company held $0.532m in cash and cash equivalents. During the quarter, the Company advised that it had entered into a subscription agreement (“Subscription Agreement”) with J F Houston Holdings Pty Ltd (“JFH”), an entity associated with, Mr. John Houston, to repay all outstanding amounts owed by the Company to JFH under a $600,000 unsecured loan. On 22 July 2020, the Company held its Annual General Meeting where, amongst other things, shareholders approved the issue of shares and options pursuant to the Subscription Agreement and the Company issued these securities to JFH.
During the quarter the Company was provided with a further $600,000 loan from JFH. The loan is unsecured and bears an interest rate of 8% per annum and is repayable 180 days from the drawdown date.
Commentary
YPB Group Executive Chairman John Houston said: “COVID-19 challenged us in numerous ways but I’m pleased we moved decisively and have been able to report another quarter of improvement in financial performance. I’m particularly grateful for the support of our whole team in sharing the pain of COVID-19 and I’m immensely proud of their success in hurdling unexpected obstacles to deliver top-tier new product. We are intensely focused on the opportunities created by our now outstanding products to drive the success of YPB.”
This announcement has been authorised by the Board of YPB Group Limited
Ends.
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About YPB Group
YPB Group Limited (ASX:YPB) is an Australia-based product authentication and consumer engagement solutions provider. YPB's proprietary smartphone enabled technology suite allows consumers to confirm product authenticity and, for brands, that triggers consumers’ engagement.
The combination of YPB’s smartphone authentication solutions and its SaaS Connect platform, creates ‘smart’ product packaging, opening cost-effective, digital and direct marketing channels between brands and their consumers. Connect gathers actionable data on consumer preferences. It can then host tailored marketing campaigns directly back to the scanning smartphone.
YPB’s technology is also trusted by the world’s largest passport issuing nation to ensure the authenticity of its passports. YPB is currently focused on the rapidly growing Australian, South East Asian, and Chinese markets. Its focus is dairy, cannabis, alcohol and cosmetics where the viral growth of fake products, particularly in Asia, affects brand value and endangers consumers. To learn more please visit: www.ypbsystems.com
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