Ann: 2018 AGM Presentation to Shareholders, page-6

Hi Vic

Yes I am acutely aware.

On the flip side:

• Amalgam sales declines now really appear to be gathering pace. If that continues, there could be some short term pain - before sunnier sky's emerge.
  
  
• Looking back to FY2005, it appears to me that whilst returns on invested R&D (total R&D effort, including that capitalised & that expensed) have been adequate, they haven't been stellar.
  
  As such, I prefer to reconstruct "earnings" (NPAT, EBIT, EBITDA etc) on a "cash basis" (ie after expensing all intangibles spend, and thus adding back intangible amortisation).
  
  The issue here is that R&D accounting expense (R&D expensed + amortisation) is running at below 80% of total R&D "effort", as it has for the last 7 years. And remember, this "effort" amounts to about a whopping 25% of EBITDARD (earnings before interest, tax, amortisation, depreciation, amortisation, and R&D).
  
  
• So "cash earnings" are skinnier, margin wise, than reported earnings. This makes them more susceptible to currency swings. In fact, lets face it, "susceptible" is not the word. The bottom line gets a battering from currency swings. On my estimates, a 10% appreciation of AUD against source-revenue-weighted currencies, results in over a 15% decline in gross-profit, but only a 6% decline in operating expenses, all of which amounts to a decline in EBIT to the tune of a whopping 50% or so (more so on a "cash earnings" basis).
  
  It's a bit hard to avoid the fact then, that that's a big piece of the puzzle, in contemplating what earnings might look like, going forward.
  
  
• Then there is the tax rate, which gets buffeted about so much by various adjustments, including differences in OS tax rates, that the benefits of R&D tax concessions have a hard time registering at the bottom line.

Cheers, Mars