Phoslock Environmental Technologies Limited (PET) Earnings Call Transcript & Summary

Okay. Well, good morning, ladies and gentlemen. Welcome to Phoslock Environmental Technologies 2021 Business Review and Strategic Outlook Webinar. My name is Greg Slade, and I'm Investor Relations Consultant to Phoslock. Shortly, I'll hand over to Chairman, David Krasnostein; CEO, Lachlan McKinnon; and CFO, Matthew Parker, to take you through today's presentation. At the conclusion of the presentation, I'll return and ask a series of questions we received from shareholders as part of the registration process for this webinar. We have approximately 200 people on this webinar and a lot of questions were submitted before hand. I've selected the most regularly asked questions to put to PET management today. But rest assured, if we don't get to your particular question, we will respond to you off-line from this webinar over the next few days. Now without any further ado, I'd like to hand over to the Chairman, Mr. David Krasnostein.

Thanks, Greg, and welcome to all our shareholders who have joined us today. We appreciate the interest and we hope this will be a productive session for you. I'm going to make a few introductory remarks, and then I'm going to hand over to our CEO, Lachie McKinnon and our CFO, Matt Parker for a more in-depth discussion of the state of the company. Many of you, I think, will have read my letter to shareholders in our annual report, so I'm not planning on covering the same ground this morning. As we know, 2021 was an extraordinary year for the company and its management. Much of their time, their energy and their focus was spent in cleaning up the company's affairs and getting them on a solid basis for the future. That effort was time consuming. It was expensive, and it was emotionally difficult for everybody. While our internal investigations are largely now completed, we continue to cooperate with relevant authorities to ensure we can put to rest a number of those legacy matters and to make sure they're comfortable, we fully address them. Where possible, legal proceedings are going to be pursued in an effort to recover the funds and the response -- bringing responsible people to account. There'll still be some ongoing costs and management time associated with those endeavors. But as 2021 drew to a close, it was very clear to me that this company had pivoted in a new direction. The energy in the company, the conversations around sales, customers was in marked contrast to what I was witnessing in the year before. Lachie is going to talk to us as an example of that, about his 2 recent trips overseas. This is the first time in over 2 years he's been able to get out of Australia and go visit our customers and staff in Europe and in the United States. And I've seen as he returns from those trips, a new energy and a new optimism about pursuing new opportunities and a new energy in our staff as that leadership points them in a forward direction. The whole company, I think I can safely say is now infused with a more optimistic view of the future. Our management team used 2021 to have a more focused view of our research and development activities and more focused and a better resource sales and marketing strategy and a sharper strategy for redirecting our manufacturing capacity and also developing a deeper bench strength for our management team worldwide, which is now in place. As we all know, what makes a successful company are its financial resources, its management, its factories, its patents, its human resources, its brand, its growth potential and most of all, its ability to generate earnings and cash flow, Phoslock possesses all those assets. We've set our focus now for 2022 on bringing all of that together to produce tangible results for shareholders. We've made enormous efforts to get the company's shares relisted on the ASX. We've done everything we can to meet all the ASX's stated requirements that they've shared with us, and the matter now resides with their staff who we're in constant contact with to ensure that they're comfortable we've met all their requirements and get us back into trading and we're hoping to hear more from them shortly. Let me now hand over to our CEO to take us through a review of 2021 and what's installed for 2022, and we'll be happy to take questions from shareholders after that. Lachie, over to you.

Thank you, David, and welcome, ladies and gentlemen, good morning to you all, wherever you are listening. I hope you'll find the next little while informative and productive. We have quite a list to get through here. I'll just run you through the broad topics. I won't go through the detail here on this slide, but we wanted to start with Matt running through some of the financials and some of the impacts that drove those financials. And then we'll -- I'll come back and conduct a fairly thorough review through of 2021 and the various topics there are listed, which you'll see, which include, as you read there, the ASX relisting question, which I'll try and cover. And then I'll finish with some outlook slides and commentary on the future of the business, which as David said, having just done some trips around the world, I'm enthused and very confident about where we're heading. So we'll finish with that. And then, of course, as we've said, we're very happy to answer questions. There's been a lot, which is great. We are very encouraged by the continued interest in what we're doing and obviously, Greg will group them in themes. So hopefully, we'll address the themes that you've all been asking first, and we can address other questions afterwards if we run out of time. But with that, I'll hand over to Matt now and ask him just to run us through the financial results. Thanks, Matt.

I'll talk to the financials now. Revenue was $6.3 million, down 8% on the $6.9 million in the prior period. The business continued to face headwinds during the year as a result of COVID-related impacts, which contributed to the project delays and the continued priority given by government authorities to managing COVID-related health initiatives. Growth profit margin -- gross profit margin was 57% for FY '21, down from 60% in the prior year. This was a result of higher freight costs in the period, partially offset by favorable pricing, particularly in Europe and slightly lower project application costs. Underlying EBIT for FY '21 was a loss of $7.9 million compared to a loss of $7.3 million in FY '20. Lower sales volume flowing to gross margin was partially offset with lower operating expenses in the period. Whilst operating expenses were lower versus pcp, they remain relatively high as a result of continued expenditure on interim management and restructuring costs in China. Ongoing legal expenses as a result of the investigation, higher auditing costs consistent with the Board's strategy to enable the company to lift the suspension of trading on the ASX and consultancy costs relating to reviews of the R&D program and the company's manufacturing supply chain strategy. Net profit after tax for the group was a loss of $3.9 million versus a loss of $25.5 million in FY '20. Shareholders may remember that the prior corresponding period included a number of noncash adjustments to receivables, inventory, plant property and equipment and right-of-use assets. The FY '21 result included noncash adjustments primarily to lease liabilities as a result of the group signing a lease modification with its landlord in relation to PETZ for Phoslock Environmental Technologies Limited factory in China. The modification reduced the lease term, square footage and overall cost and is part of the ongoing effort to rightsize the business in China. The value of this adjustment was around $3.3 million. As reported in early January 2020 -- 2022, apologies, the company secured a settlement in relation to the outstanding receivable involving a former customer and related party in China, BHZQ. The settlement concluded all arbitration and court cases for claims and counterclaims initiated by Phoslock or BHZQ against one another. Now the cash. Cash payments for customers for the year were $8.7 million. Cash payments to suppliers and employees for the year was $15.5 million. Receipts from customers came primarily from the previously announced contract to remediate Kralingse Plas Lake in the city of Rotterdam in the country of Netherlands. Cash outflows for the period included the previously announced consulting work on the manufacturing footprint and R&D activities. The decrease in cash outflows versus the prior corresponding period, primarily related to lower employee payments and lower manufacturing-related activity. FY'21 also included higher direct and indirect tax payments as the company continued to resolve legacy tax issues identified from the investigations. It should be noted that the financial statements in FY '21 were prepared on a going concern basis of accounting, which assumes the continuity of normal business activities and the realization of assets and the settlement of liabilities in the ordinary course of business supported by the group's strong cash position and net current asset position of $26 million. The group expected to utilize -- the group does expect to utilize some of this -- of its available cash reserves to support its activities in the short term and settle amounts relating to external adviser costs arising from the ongoing litigation as a result of the Board investigation. The group's current cash flow forecast indicate that the cash held by the group will be sufficient to support its operating activities and pay creditors as and when they for due. And with that, I'll pass back to Lachie.

Thanks, Matt. And as Matt has illustrated, I'm just hoping you're seeing the right slide here for us here in the office. We have gone back to looking at ourselves. So I hope you've got the right slide up here now for you guys to look at. It should be Slide #5. So as Matt detailed, 2021 wasn't necessarily a happy year for us in terms of our financial results. [Technical Difficulty] We -- what's that? We appear to be having a technical issue guys. Can you just bear with us for a minute, and I'll just see what's happening, Apologies. We've just lost our internet connection, which we had actually talked about being the worst thing that could happen for this webinar. So I apologize for that. We'll just reconnect just give us a minute, and that's why the slides have gone down, sorry. Apologies, everyone. I hope you can now see the key issues impacting the business slide and you can hear me okay. That is one of the risks of doing webinars online, I guess, that the Internet can let you down. So I do apologize about that and hope you're all still there and we'll carry on. So as I was saying, we weren't thrilled, obviously, with the results of 2021. There was a lot of progress made in the business in other areas. But clearly, we feel short of the results we were looking for through the year. And there were a number of key issues that affected the business, and Matt went through a number of those as well. Clearly, COVID has affected the business. It does affect a business like us quite a lot in terms of travel restrictions and lockdowns, funding priority changes from governments and increased freight costs. But it would be wrong to just say it's all about COVID. I know a number of shareholders have mentioned that there might be other things that we need to address, and we certainly are. The business is rebuilding in a lot of areas, and I'll talk you through some of that as we go. Other big impacts through 2021 on the business, both positive and negative were around the resetting in China and the improved systems and governance that we have put in place. Significant resource and time, as David has mentioned, have gone into that, particularly Matt and myself, to addressing those legacy issues. And that continues to some extent that we simply have to address those to get this business on the right footing. We have, at the same time, restructured and conducted a comprehensive business review of the China business, and there's been a major restructuring of that business, which I'll talk you through in a minute as well as the go-to-market strategy in China. And throughout all of that, across the entire business, we've increased and lifted our governance standards across the whole business to ensure we're operating appropriately in all jurisdictions of the company, which of course, included, as you know, significant renewal and change of the Board of Directors. While all of that has been happening, we've implemented a new growth strategy, which I'm really pleased with how that's rolling out. We've restructured the global commercial operations largely in many of our areas. We've had significant reviews of R&D and the manufacturing and supply chain strategies, which have been conducted. And we've also done a lot of work around our people performance and the culture of the business on the way through. And I'll talk you through a number of those issues and those opportunities, rather, I should say. Thanks, heading to next slide. So perhaps just to elaborate a little bit more on the legacy issues. David did touch on it in his opening remarks, and so did Matt to some extent. You all know we have conducted a very thorough independent investigation into all the matters. Some of this is ongoing and will go on for some time. We make no apologies for that. We have a firm commitment to make sure we understand everything that happened in the business in the past and set this business on the right footing for the future. We cannot allow what happened in the past to happen again, as I'm sure you all agree. So it will continue for some time, but we are committed to get this done. I mentioned the independent review in China, which was undertaken. That was a comprehensive review, provided great insight into the Chinese market and how a business like us can operate in the Chinese market. And so -- we've made some changes to the Chinese business, particularly our go-to-market strategy, which I'll elaborate a little bit more on in the coming slides. You're well aware, we've put a new risk framework in place with the appropriate corporate governance, delegation authority -- of authority and appropriate measures across all of these areas, which has been and is critical to operate this business appropriately in all areas of the business. We've made significant changes to senior management, as you well know. In fact, almost every area of the business with the exception of Matt and myself has changed since the beginning of 2021, and we brought in significant resources and skills to operate the business on the platform that we're -- and under the strategy that we're working towards. There was a big focus on China debt collection. You're aware of that, and you're aware of the success with BHZQ, which was great in getting that receivable. We still have much work to do, and we are pledging to new shareholders that we are working hard on the Xingyun Lake receivable as well, and that continues to be a high focus for us. As part of the legacy issues, we continue to cooperate with the Australian federal police. That is an important component of addressing the issues of the past, and we continue, as I said, to cooperate. And as David mentioned, legal proceedings will be pursued against certain individuals and we've talked a little bit about that in the past. Thank you. If I could just now turn to the business. And as you've seen, we've talked before about described the business in the various geographies that we operate in and give a commentary on 2021. what happened and also any summary and opportunities that we see coming through those particular areas. And starting in the top left with Canada. I've mentioned a few times how the interest for the product in Canada is fantastic and continues to grow with almost a new inquiry every few weeks coming through Canada. The issue we have is a regulatory issue in Canada for, I guess, unknown reasons, to some extent, the Canadian authorities are wanting us to do a lot more regulatory work. to gain that registration. We are committed to doing that, and we are committed to working with them to achieve that registration. But I wanted to mention to all stakeholders and shareholders that this will take some time to resolve regulatory procedures and matters are notoriously slow. And so while it's frustrating, we still believe it is worthwhile and important on the basis of what the Canadian market can offer the business that we pursue and continue with that registration work. So we'll update you with significant milestones as they happen in that, and we have strong confidence about achieving that registration and be the Canadian market itself. In the U.S., fair to say this was a disappointing year. We did not meet our expectations in 2021, we had expectations of certain volumes from our distributor in the U.S. throughout 2021, they weren't met. We have actually ceased our agreement with SePRO, our distributor in the U.S., and have begun -- some months ago and part of my trip to the U.S. was around the distribution expansion, which I'm pleased to report is really positive. And the commentary from the distribution that I spoke to and I was in Florida and the Midwest and various parts of the U.S. were all very, very supportive and in fact, very keen to get behind the product, which will help provide the footprint in the U.S. that will lead undoubtedly to larger projects. And we have had some -- I had exciting meetings with the City of Orlando in Florida and a number of others that were very encouraging about what the U.S. can do. We will be enhancing our commercial structure in the U.S. with additional resources, and I'll talk a little bit more about that as we go. But we've done a fairly in-depth analysis of the market throughout 2021 and are encouraged with the opportunity if we put feet on the ground, the sales will come and the sales will come quicker. So we're pursuing that strategy with some vigor as we speak. In Europe, we had an excellent year, largely on the back of the Kralingse Plas treatment in the city of Rotterdam. But not just that, there was many projects treated in Europe throughout Western Europe, throughout the Scandinavian countries, Denmark in particular. And we continue to see more and more opportunities appearing in Europe. The Kralingse Plas treatment, which I'll talk about on another slide in a minute, was exceptionally good and has created a lot more awareness and opportunities in Europe. So we're very excited about that. We've appointed, the latter part of 2021, a commercial lead in Europe, Damian Whelan, who's hit the ground running and he's really energetic and enthusiastic to what we need to do as well as Kate Waters coming back from maternity leave in our science role, and we also have an application lead based in Germany, who -- Derek, who's come out of the U.S. So we're very excited about the team and also the opportunities in Europe. We're seeing early projects already. Part of my trip was to visit Glasgow, where we traded heritage block, not a large treatment but nevertheless a repeat treatment. And the commentary from the manager of the lake or the heritage lock, I should say, said that we would not be able to open this lock without having you guys treated -- having Phoslock applied, so they wouldn't be able to open for the summer season. So it's very exciting about what we can do. We have more projects coming through Europe, which we'll detail at a later time. And we're also opening up some opportunities in Spain and France, which we haven't really done a lot in the past. So Europe is very exciting, very exciting. In South America, I described the business in Brazil is consistent. Our licensee there, Hydroscience, does a fantastic job of the current projects, but also has some new projects emerging a little bit early to be forecasting or budgeting for those new projects. But nevertheless, knowing his track record, they will eventuate and Brazil remains a very important component of our business. We're also seeing, as you've heard me talk about before, some other opportunities in South America, particularly Uruguay and Ecuador, emerging, which is encouraging as the business spread its footprint across the South American continent. In China, I've mentioned a couple already around -- a couple of times already about the business being restructured and reset. That's a very important point for shareholders to note. At the time of our troubles of late 2020 or mid-2020, China was representing something like 85% of the business. So you can imagine when that hit the fan, so to speak. We were having to reset the business quite substantially to get the whole business back on track in China was an important part to reset. We reviewed our -- and overhauled our manufacturing operations and our channels to market. So there's been a significant amount of work done in China. And I think Matt mentioned it to what we call rightsize the business. And while the big projects are fantastic, we need to have a business that can be sustainable through all projects and volume sizes as they come. So we are expanding also our portfolio in China with some tweaking of the products to meet some opportunities that we're seeing in that market, and I'll talk about that in a minute. Also in Australia and New Zealand, you know we completed works in Western Australia and Queensland. We have a project ready to go in New Zealand at the city of Auckland. And that's been delayed due to COVID. We're expecting to treat that in the next couple of months. But of course, that's pending travel restrictions, which, as you know, change quite regularly, but we will do that. We have a lot of opportunities coming through in Australia and New Zealand. Some of them are quite large. They're early days in some cases, but they're nevertheless encouraging to know both markets have opportunities. We've resourced in New Zealand with a distributor and a sales agent, some application support and some marketing support, all ready for what we see as good opportunities in this part of the world. Okay. Thank you, just a couple of points on Kralingse Plas. It's a fantastic opportunity. That's the lake there. Underneath the windmill is the restaurant. I was there last week, and I can tell you that all stakeholders around the lake are very, very pleased with what's happened. The water is crystal clear. The treatment and the application could not have gone any better. Over 1,000 tonnes was treated, it was completed in under 4 weeks. The whole project was great from go to way. And the results, perhaps more importantly, are really spectacular. The city of Rotterdam, led by a gentleman called Anne Mollema could not be more supportive and more pleased with what we've done. So much so that we will be treating more waterways around that lake in this year, not unfortunately to the size of the Kralingse Plas itself, but nevertheless, a clear indication that what we did has worked and are very exciting. And the other exciting thing about a lake like this is the other cities around Europe, not just in the Netherlands, but around Europe, a number of other cities have contacted the city of Rotterdam -- sorry, a number of other lake management municipalities have contacted the city of Rotterdam already because it was a very public project. So a lot of people know of it and have asked how can Phoslock help them. And so we're very, very pleased with this whole treatment and the -- and if you like, the marketing campaign around it has been really well received as well. So and just before we leave that, sorry, Danny changing the slides. I would encourage you, if you haven't already have a look on social media or on our website to the videos they're extraordinarily supportive from the city of Rotterdam and really are encouraging for all of us in the business, but I'm sure for shareholders as well to see what some customers see as the value of this product that they're investing in. Thank you. So just changing direction a little bit. I wanted to update you all on the growth strategy and the key drivers of that growth strategy. You all know that our position is -- or our strategy is around expanding access across multiple geographies and products. That's what we -- that's our broad strategy. And to deliver that, we've broken it up into sort of 4 sections that all have to work together and all have to be right to help us achieve that strategy. So these are the drivers, if you like, of the business: Customer and commercial, manufacturing supply chain, research and development and people performance and culture. So it is my intention to sort of use these 4 pillars as a basis to update people, update everyone as we go on how we're performing in each of these areas. And I'll do a quick update now on each of them. Thanks, Danny. So for the commercial platform, as I mentioned, we are building the sales teams in Europe and the U.S.A. particularly and right now in the U.S.A. We've done quite a lot of market analysis about what we need in each of these regions, and it's pretty clear with basically one person in the U.S. and one in Europe, one commercial person in Europe, that we're under done from resourcing. And the analysis clearly stated that if we clearly showed us that if we resource these areas, we will see sales increase and project increases. So that's what we're doing fundamentally. And as I say, we're going to focus on a number of countries in Europe. So it's not a broad bust approach across all of Europe, but a number of countries, you can probably guess the main ones from the way we've been talking about the Netherlands, Germany, Scandinavian countries and the U.K. first, and then we'll expand further as we grow. And in the U.S. targeting some specific regions around the Midwest and the Northeast and of course, the Florida region, which I'm sure you all know has so much water and so many opportunities. But we need to target it, and we need to be, what I would call, a little more targeted than we have been in the past to achieve those sorts of results. I mentioned the travel restrictions easing. I don't think we should underestimate the effect of these on both the sales team and on management. As David said, this was my first trip in 2 years, to actually meet some of the team, some of my team or our team that we've put in place since COVID started. So that was critical, and it was great to see the guys and girls face to face and also, of course, customers face-to-face because you get so much better understanding of what's happening when you can actually eyeball people and talk properly. So that was fantastic. So that was good for me, but also for the sales team being able to actually travel around reasonably uninhibited is very important, and we're seeing a lot more activity as a result of that travel. It's still not easy. There's still different regulations and rules for each country, and you have to be aware of all of those, but it's certainly a lot better than it was and certainly starting to open up for us. So I don't understate the importance of being able to travel and hence, the indirect effects of, if you like, the COVID pandemic, that it's had on the business. I've talked about China and our sales model being reviewed and restructured. So I think we've covered that. And importantly, and I'll talk about this in the R&D space, we have a number of products coming through that will fit the commercial growth strategy, and so will fit into the commercial plans well. And obviously, no R&D project will see the light of day that doesn't have a commercial fit and hasn't been well and truly investigated and analyzed from the commercial opportunities. So that's very important in our commercial platforms. That, by the way, the photo is the team at Kralingse Plas. So the 2 guys on the left, you might recognize Nigel, that's Derek, our applications guy and the other guys were helping us with the application. So just for your interest. Very exciting news here around manufacturing and supply chain. We can let everyone know that Casper in Wyoming in the U.S. is the preferred location for our second manufacturing plant. And you all know we've been talking about this for a while, but a site has been identified. It is adjacent to Bentonite Supplies. As you know, that is a key component. In fact, the majority component of our product when you're choosing a manufacturing site, you can be close to supply or you can be close to customer. And we've chosen to be very close to supply and pretty close to customers. So that's why we've gone there. The evaluation suggests that it will be a low cost of production and certainly a low-cost of supply. Very important to note that the state of Wyoming and actually the city of Casper are extraordinary supportive of the business and our opportunity there that we've been working with them now for many months, and they're extraordinarily supportive of what we're trying to achieve and the indirect effects of getting access to the water manages through Wyoming and other states that provide the sales opportunities to us. So that's been very important. And of course -- well, not, of course, but it is important to note that Wyoming and Casper, in particular, are kind of well-situated for the freight hubs, North, South and East, West across the North American continent. So we are working still on design to continue in Q2. We will put in price of purchase option around the site while the final assessments are being concluded, that will have some contingencies in it. We won't move to full commitment until we are confident -- fully confident of all the future volumes planned in the business. And at that point, we'll be seeking full commitment from the Board and will go ahead. But we will continue to review that against the forecast for the business in the future years. Also in this area, we've improved and committed to improve the China plant, which has been now ongoing or will start in Q2 and Q3, very important for the Eastern Hemisphere that, that plant operates as expected. And we've done some pretty major work in our S&OP or supply and operations planning throughout Q4 of last year and Q1 of this year to ensure we have the right inventory in the right spot in the right amounts. So that's our manufacturing and supply update. So some exciting news there. Also exciting has been the work in R&D, particularly in the last few months. We appointed a gentleman by the name of Michael Doyle, a PhD scientist who came to us on a contract -- on a contractual sort of basis, who's now agreed to be permanent part time in the business, which is very exciting. So that's good news. And we've identified 4 priority projects that are progressing at speed. And 2 of the projects are in the core, 2 are in the transformative part of the business. In the adjacent space, we haven't really spent as much time on at this point. But in the core, I mentioned China is looking at a couple of different options in their portfolio: one, a lower cost product, Phoslock Eco we're talking about, it's under testing at the moment to suit a certain part of the market up there. And then there's also a Phoslock Plus, which is actually almost the other end of the market, which is a high efficiency -- higher efficiency product also under development. So there's a couple of things going on. The work they're doing there may have global applications, and that's obviously what we're hoping. I mentioned also that we're expanding our distribution channels in both Europe and the U.S. that's quite significant. And coming with that is some work around the product itself and its ease of application across multiple types of waterways. So that's a really important piece of work that's going on. As you know, it can be sometimes challenging to apply the current product, particularly on smaller waterways. So this is an important piece of work that we're doing and developing. Equally, if not more exciting, is the work in the free flowing water treatments. I'm well aware and shareholders constantly remind me that there are a number of competitive products coming through in this space. We are aware of them, and we're aware and testing a lot of them. So we are -- I don't profess to know all of them, but I certainly do know some of them, including some of them from previous distributor in the U.S., which we've been questioned about. But we are developing our own, and we're very confident with a number of technologies that we are reviewing. It wouldn't probably be pertinent to go through all of them, but you've heard us talk about ZEEP before, [indiscernible] product. We're expecting to do field trials in the middle of this year on that product. early indications that will be very successful. But there's work to do. And we're also very excited about a contaminant binder that we're working with a U.S. partner about high-capacity phosphorus absorption for treating particularly storm water and ag runoff. And there's also further developments there around that technology for larger like applications. So there's some really exciting product development work going on, which I'm really pleased to be able to report to you guys. Thank you. And finally, in the drivers category, people, performance and culture. I think the key takeout from this slide, guys, is that we've changed. The business has changed. We bought -- we've done a lot of change, a lot of management changes, a lot of structural changes, a lot of operational changes. And a lot of it has been around the people, what we're trying to achieve. You can't deliver your strategy without the people and you can't expect your people to know what the strategy is and have them delivered unless they operate under a structure in a guidance that leads them through there every day, their job, so to speak. So we've changed. Aspirationally, we were pretty much largely one-off big projects and that was the approach more recently. And then the change, if you like, is a much more holistic approach to the way we treat the environment, our follow-up work, the work with communities, natural ecologies that we're dealing with, benefits to economies and a much more, as I say, a holistic approach to our customers and their business. in the capability area, we've moved from sort of having the business running on the capabilities of the people that were involved to more about what do our customers need and what our customers want from us, and structuring our business and capabilities around that. And so we've seen a significant lift in the diversity and skills of our people. And that's been, as I've said, around some of the management we've put in, but that's to meet the customer needs. And I think that's the right approach for this business. And culturally, we've moved from an emphasis on sort of entrepreneurial growth with weak controls to a culture that's led by the Board and the leaders of the business around what we're calling PET's 3C's, care, collaboration and courage. But obviously, and you guys would know this, that the culture, if it's right in the business, will run the business the right way. So it's a very important component to how the business must operate. And that's ongoing. I mean, all of these are ongoing. You don't do it once and stop. They're all ongoing. But I wanted to share with you some of that about how we setting the business up and our people in the business to deliver the results that we all need. Thank you. Okay. So changing now a little bit, get tacked again here. So multiple questions on ASX relisting. I would just say, as David said, we are very aware. We're very much like you guys frustrated that we haven't been trading for some time, and we're doing all we can to get that relisting happening as quick as we can. The timing of the relisting, as you know, has been impacted through 2020 and '21 audits and other matters. Some of those matters as you're aware, but they're worth repeating the corporate governance requirements, the board makeup and renewal, comprehensive investigations and independent investigations, the financial outlook, operational improvements, strategic initiatives are all areas that we've been working on with the ASX under their guidance and direction to meet the requirements to be relisted. And as David said, we've done all we can do at this juncture. We've submitted a comprehensive submission to the ASX, along with the audited accounts for both the full year 2021 and the half year 2021. And we did the half, as you would remember, to ensure we had the best opportunity to relist and give as much information as we can to shareholders, but also to the ASX so that they feel comfortable about where the business is. So we've done that. We've submitted that, and we now await their review and their comments on the review. And of course, we'll update shareholders as soon as we hear anything from the ASX, and that's our commitment. Just one final point, and I need to go back to the slide. I'm sure it goes without saying, but I'll say it. The Board and the management are committed to getting this done. It is one of our highest priorities. So I hope you all understand that. We all understand your frustrations with it. So hopefully, you'll at least understand where we are at this point. Thank you. So just to finish, an outlook slide, if you like, broken into 3 sections. For 2022, first the financial year 2022, which as you know, is a calendar year, it's going to be a challenging year for us. We're still rebuilding our sales pipeline after some significant shocks to the business, both from legacy issues, but of course, COVID and other challenges that have come at us in the last few years. However, we are continuing to grow, and our diversification strategy is working and continues to look positive for the future. We are forecasting significant sales growth in both Europe and the U.S., and they will be the major drivers of our year for 2022. Obviously, Brazil, Australia and New Zealand and China obviously contribute to the business significantly as well. However, the U.S. and Europe are our big growth engines for this year. We will have some legacy issues and costs to deal with. There will be resources required to manage some of these issues, and that's what I went through a few slides ago. So that will be ongoing through 2022 as well. For us, the key areas of focus the ASX relisting, of course, the commercial enhancement, I've talked about those. I didn't mention funding opportunities, but certainly a big area of focus for us will be to see whether we can uncover and get funding for our customers to help treat some of the projects that they have, and we have with them. As you know, one of the limitations is funding to getting treatments done. So there is -- and there is funding around. So that's a job that we're going to focus on more this year. Canadian regulatory work. I've talked about the R&D, launching new products in 2022, very exciting, but obviously, a lot of work has to happen. Progressing the manufacturing expansion is ongoing in 2022, returning the business as much as we can to normalized operations. David mentioned it at the start. That is certainly a focus for us. Recognizing that there's still issues to manage through, and we have to manage those. But that's a focus for me. The China plant upgrades and of course, a little bit to early just said, we still be managing litigation and legacy issues. We have to manage them appropriately and respond appropriately to the various investigations that are ongoing. So that will be a key area of focus. And I guess why am I confident, why are we confident about the business in the future? And we are. I mean, as David said, I'm actually very enthused after having been not able to travel for 2 years to travel to Europe, to travel to the U.S., it was really great and very, very encouraging. We do have a clear competitive advantage with our product. There's no doubt about that. I'm excited to learn how good that product is when you see it firsthand in the field. And there's nothing else that comes close to it. Yes, I'm aware there are competing products and people making claims they have done for some time. There's nothing that really comes close to us. And perhaps importantly, we are developing some really good technologies, which I will say we'll outcompete a number of these things that we're seeing coming through now. So that's very exciting. We do have the large and growing market and opportunity. I should have mentioned in Europe, one of the things is the European Director, which talks about managing nutrient pollution throughout waterways in Europe and those municipalities and owners of waterways, whoever is managing those waterways must comply so many lakes will not comply that are too heavy in phosphorous contamination. There's opportunities like that everywhere, and that's happening as we speak in Europe and many, many people that I met are talking about those. So that opportunity is large. Along with every second day, we hear something about environmental changes in global warming and methane gases coming from algae. And so there's all sorts of things that continue to drive this macro market for us, which is large, which is growing. And so that opportunity remains really, really good. The diversification strategy, I'm happy that it's working. It's obviously got more to do, significant and successful commentaries from people where we've treated gives me great confidence in the product. We do not fail. We have great results when we treat. And that when you treat public lake like Kralingse Plas, for example, you get great feedback and creates great opportunities. And as I say, we're seeing that already. And of course, the company remains well capitalized, which is important. And enabling us to do what we need to develop it and ultimately set it on the sustainable growth, profitable growth path that we've talked about. So I think, Greg, I'll leave it there. Again, thank you, everyone, for their attention. Happy to handle questions. I see we're approaching towards an hour, but let's have some questions now, Greg, please.

Thanks, Lachie. Yes. I've collated the questions that we got as part of the application registration process for the webinar. Now I've got a couple of questions, Lachie, Matt and David before we finish up. I know we have touched on a lot of these topics in the presentation because we had the benefit of seeing the questions beforehand and we were tweaking the presentation up until last night to try and cover off as many as we can in the body of the presentation. But anyway, I will start with Lachie. It's been quite a few comments from shareholders about competing technologies to Phoslock's products. And can you comment on this in a bit more detail on what we're doing in response?

Yes. It's a good question. And obviously, one, we saw a number of people comment on it. I would say that, as I mentioned through the presentation, Greg, we are aware of let's say, the majority of the competing products that we're seeing in the market. And when I say competing, I use that word a little loosely because there's a lot of claims made to be quite frank, that aren't correct. And we take many of these products, sample them, evaluate them and understand whether they are seriously going to compete with us or there might be noise. Now we're aware of most and we have, I'd say, limited concern about most. We're aware of certain, let's say, previous -- how do I put this -- previous distributors that might even be planning to launch products that look a lot like Phoslock. We're obviously making sure nothing has been contributed in any of those kind of approaches. But we're also, and perhaps most importantly, developing our own technologies. And we have some great work going on here in Melbourne. Also in Sydney, we're working with the University in Milwaukee, who I visited when I was in the U.S. around developing those particularly flowing water [ peak ] capture, but also flowing water end capture, which are very exciting. And I think while we're aware of those technologies, we've also -- sorry, and the competing products. We've also got our own projects and development underway. And that's been kind of turbocharged in the last few months to really make sure that we're seen as the innovating company that brings this technology to the market. And we have some trials going on in the U.S. right now with some of these projects. So -- or products and technology. So I'm confident we can manage that, Greg.

Okay. And heading into the Northern Hemisphere summer, how are forward orders and general interest looking? And in particular, can you comment a bit more on the new sales arrangements in the U.S. now that SePRO is no longer a distributor.