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

Good morning, everybody. It's Friday, 27th of May, and the time here in Melbourne is 10:30 a.m. This is the Annual General Meeting of Phoslock Environmental Technologies Limited. My name is David Krasnostein, and I'm Chairman of the company. I've been informed by the Company Secretary that a quorum is present, so I declare the meeting open. Let me begin by acknowledging the traditional owners of the land on which we meet today, the warranty people and pay my respects to their elders past and present. I also want to welcome all of your shareholders, proxies and guests to this hybrid meeting. I'll explain in detail how the meeting is to be conducted and how to vote, how to ask questions and how to reestablish communication should you drop out. Today's hybrid meeting is both online via the Computershare meeting platform and also allows in-person attendance here at the meeting venue. For those of you attending the meeting online, you are all watching a live webcast and shareholders and proxies will be able to ask questions and to submit votes. Let me start the meeting by firstly introducing my fellow directors and the company's management. Then I'll run through some housekeeping matters, including procedures for voting and for questions and then we'll run through the order of proceedings. I will now introduce my fellow directors and senior management. To my left are Lachie McKinnon, our Managing Director and CEO; Brenda Shanahan, Non-Executive Director; Barry Sechos, Non-Executive Director and Chair of our Remuneration Committee; and Bob Prosser, Non-Executive Director and Chair of our Audit and Risk Committee; and our CFO and Company Secretary, the hardworking, Matt Parker. We are also joined today by a number of other members of the PET senior management team, representatives from our trusted legal advisers, Arnold Bloch Leibler and Haley Underwood our audit partner. As you know, there are 5 items on the agenda today, 3 of which require a shareholder vote. The 5 business items are: firstly, consideration of our 2021 annual report. Second is a resolution 1, adoption of the company's remuneration report. Third item is resolution 2, reelection of Ms. Brenda Shanahan as Director of the company. The fourth item is resolution 3, a resolution to hold a meeting for fresh election of directors, and Item 5 is any other business that we might have. I will now explain the procedure for voting in the meeting. Because of the hybrid format, voting by necessity differs somewhat from in-person meetings. All voting will be conducted by way of a poll on each of the 3 items of business requiring a vote. If you're in the room today with us, you would have received a blue polling card when you registered along with instructions on how to vote. Those cards will be collected towards the end of the meeting. For those of you who are attending virtually and have not yet voted, you will need your SRN or HIN number and a post code in order to vote electronically. Of course, if you've already voted, you do not need to vote again unless you change your mind during the meeting. If you're attending virtually and you're eligible to vote, a polling icon will appear on your screen. Selecting this icon will bring up the list of resolutions and present you with voting options. To cast your vote, simply select 1 of the options. There's no need to hit a submit button or an enter button as the vote is automatically recorded. You do, however, have the ability to change your vote if you wish. Voting is now open and the polling icon will appear. You can vote at any time until I give you 5 minutes notice towards the end of the meeting that voting is about to close. Polling cards will also be collected from those who are attending this meeting in person. Voting opened on Friday, the 22nd of April 2022, and to date, 629 online and proxy forms have been lodged on the Computershare meeting platform, totaling 12,074,299 votable shares. Subject to certain exceptions, directors are excluded from voting on resolutions 1 and 3, but are eligible to vote on Resolution 2, the reelection of Ms. Brenda Shanahan. Voting results for each resolution will be lodged with the ASX probably later today or prior to market opening on Monday and will also be posted on our website. I will now show the proxy voting on the 3 resolutions as of the cutoff time on Wednesday, the 25th of May 2022. I -- please note that all undirected proxies held by me as Chairman will be voted in favor of the first 2 resolutions and against the third resolution. As mentioned previously, today's hybrid meeting is being held online via the Computershare meeting platform and in person. This allows shareholders, proxies and guests to attend the meeting in person or virtually. All attendees can watch a live broadcast of the meeting. And in addition, shareholders and proxies have the ability to ask questions and to submit votes. Online attendees can submit questions at any time. To ask a question, please select the Q&A icon, type your question in the text box. And once you finish typing, please hit the send button. Please note that while you can submit questions from now, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on the same topic may be amalgamated. To ask a verbal question, please follow the instructions written below the broadcast. For those of you here in the room with us, we have 2 roaming microphones for you to ask questions. I'll advise when we're taking questions on the floor at various times during the meeting. Because of the substantial amount of information we're presenting and the virtual hybrid format, there's a possibility we may run out of time to answer all of your questions. And should this happen, they will be answered after the meeting ends via posting on our website. Now is that rather dry stuff out of the way. Let me move to my Chairman's address. Much has happened since we came together at our last AGM in May 2021. I don't plan to repeat in any detail the restructuring and remedial work we undertook this past year as we've already covered that in great detail with our 2 webinars in March and last November. I also addressed that work in detail and my message to shareholders that accompanied our 2021 annual report. Today, I'd like to provide you with an overview of where we are as a company and where we're going. Our #1 priority is to relist at a secure sustainable and profitable growth for the company, resulting in value for the shareholders, which is why we're all here. We see this happening in 3 phases of recovery and growth. Phase 1 is drawing to a close. It involved reconstituting our financial statements that were severely impacted by fraud and mismanagement and restoring their integrity such that our new orders -- new auditors could give us unqualified assurance going forward and so that we could assure the ASX that we were solvent and viable. At the issuance of our next half year accounts, I believe this work will be done. Thank you again to our CFO, Matt Parker, who worked tirelessly and for his exemplary efforts in this critical area. Phase 1 also involved meeting our legal obligations by reporting past incidents of mismanagement and fraud to ASIC, to the ASX and the Australian Federal Police. The work on this is also largely complete. We now await any further questions that might arise. In Phase 1, we investigated potential legal claims against wrong doers. This work has also well progressed. Our intention is to file a legal claim seeking damages from former Director Jing Yang Ying, this is imminent. In addition, we have served a lever of demand on our former CEO and Managing Director, Rob Schuitema. On the topic of litigation, legal claims were also filed again China against Yuchi City to recover our AUD 7.8 million receivable for work on the Xingyun Lake project. mediation session was held on this litigation last week in China, the defendant, Yuchi City acknowledged and did not dispute any of the contractual details. Notably, Yuchi City did not dispute the basis of our claim, and we are grateful for their cooperation. The Chinese judge encouraged all parties to settle the matter with reconciliation. However, the city acknowledged that nonpayment was due to budgetary constraints. Discussions are ongoing with the city and other government parties. We have other potential claims that are being considered and shareholders will be kept up to date on those matters as they progress. As we've said previously, however, we need to balance cost and time of litigation and moving forward against the risks involved and the desire to get as much of these issues behind us as possible. Phase 1 also involved rebuilding our international sales and management team, bolstering our corporate governance with new company policies, financial controls and transparent and timely reporting, rethinking our global sales strategy and revitalizing our R&D program. Progress reports and all that work was the subject of our 2 webinars and has been detailed in our annual report. Lachie McKinnon, our CEO, will also touch on developments relating to our commercial structure and our R&D programs when he addresses you shortly. One key piece of unfinished business from Phase 1 remains relisting on the ASX. This has been a priority for the Board and management. We are in correspondence with the ASX and discussions are ongoing to try and satisfy their queries. As announced last week, we have recently provided a supplementary letter to the ASX in response to questions raised following the company's submission to the ASX earlier this year. In this latest correspondence with the ASX, we have reiterated the company's growth strategy and plans to return to profitability, provided near-term cash flow projections and have clarified the justification for provisions and asset write-downs taken in the most recent financial reports. We remain committed to keeping shareholders updated in respect of our efforts to have PET shares reinstated on the exchange. Let me now talk about Phase 2. With Phase 1 fading in our rear-vision mirror, Phase 2 is our recovery and path to profitability. And I'm happy to say it's now well underway. This targets 3 main priority goals: sales, production and R&D. Our sales strategy has been extensively revised under Lachie's leadership. China remains an important market for us as a country has thousands of trophic polluted lakes and catchment areas many, if not most of them, ideal for remediation with our Phoslock technology. However, China remains a challenge for us. The company has been chasing business there for many years and has secured various contracts with the largest of those, now the subject of a court action where we're trying to get paid. With our strict code of conduct approved by the Board, for doing business overseas, we accepted securing new business on acceptable terms and with appropriate levels of transparency and governance is going to be harder, not easier. China, of course, is facing its own challenges in trying to achieve 0 COVID cases and impose lockdowns and domestic and international travel restrictions. All these factors have combined to mean we need to accept that realistically, it will be some time before we can build a stable and profitable business in China. Our growth strategy is centered on diversification both geographically and in terms of market segments, we're able to address. To support that strategy, we've undertaken an analysis of sales opportunities in regions around the world. One very encouraging and exciting outcome of our sales analysis is the hiring of Damian Whelan to head up our commercial operations in Europe. We've recognized that Europe represents a more encouraging market for us in the short to medium term. We've asked Damian to record a brief presentation to shareholders that will show you shortly so you can hear from him directly. Our recent success in Rotterdam has significantly lifted our profile in Europe, and we're greatly encouraged by the potential in the Netherlands, United Kingdom, Finland, Ireland, Sweden, Germany and elsewhere. In the United States, we're seeing more potential now that we've restructured our commercial offer and our go-to-market strategy and exited in particular, our exclusive distribution agreement with SePRO. Harry Knight, our U.S. manager, is doing an excellent job raising awareness and orders for Phoslock and securing new leads that will hopefully convert to contracted sales as we move forward. Canada is seen as a significant potential sales market once we overcome licensing classification issues with the Canadian government. And South America remains an important contributor with consistent sales in Brazil and new opportunities emerging. A number of production-related issues also need to be addressed in Phase 2 of our recovery and growth. Our targeted current cost structure, we need to make and sell more than 6,000 tonnes of Phoslock per year to be profitable. The Board is this month authorized expenditure of AUD 1 million to increase capacity in our China manufacturing plant to 6,000 tonnes per annum with this upgrade to commence immediately and to be completed within the fourth quarter of this calendar year. With our current inventory levels, we're satisfied this will give us the adequate productive capacity to meet sales potential this year and next. Once that achieved, Phase 2 will focus on potential construction of a new state-of-the-art scalable factory in Casper, Wyoming. This would take our total manufacturing capacity to 12,000 tonnes per annum with potential to expand capacity further as demand and sales continue to grow. The proposed U.S. capacity investment brings other potential advantages such as reduced transportation costs, freedom for U.S. tariffs on Chinese imports and greater efficiencies. Lachie will speak more about that project shortly and how we're preparing to move forward on that project once sales demonstrate sufficient demand to justify the expenditure. Phase 2 also sees us expanding our range of products. Some excellent work has been done this past year and identifying leading candidates for expanding our product range and Lachie will also expand on some of these opportunities shortly. The key goals for Phase I of our plan would see us building the U.S. plant with increased capacity building a strong sales pipeline with broad geographic representation, launching other products and services that enable us to address new market segments and reinvesting in our sales team globally. The Board and management team share with shareholders a sense of urgency and impatience in executing on Phase II and Phase III. COVID is still blowing headwinds with restricted travel and lockdowns in China, governments and their municipalities struggling with distractions and costs of managing covert at a local level and of course, astronomical shipping costs and delays. I don't mention these as excuses, but as further challenges, many of which we hope will be for short-term nature and will fade over time. They will, however, slow the rebuild of our sales pipeline as selling to governments has always been a slow progress and more so during COVID. When I reflect on these 3 phases of recovery and growth that I've just talked about, they're very typical of what shareholders would recognize in any new technology company, that's just launched its business. Of course, Phoslock has been around a long time. The current Board and management can't change the past, but we can influence the future. and the events of the past couple of years have necessitated a complete reset of the business and in effect, a new start to the company. This is a new start for Phoslock and one we, as a Board and management team are determined to succeed in. I now call on our CEO, Lachie McKinnon to review Phoslock's 2021 results and operations and discuss our future prospects for the business.

Well, good morning, everyone. Thank you, Chair, and good morning, and welcome to everyone here in Melbourne and also to those of us joining online. I wanted to talk to you today about 3 topics or in 3 main areas to discuss. Firstly, around 2021 performance; secondly, around updating you on the progress of a number of reviews that we've undertaken. And then thirdly, to make some commentary on the outlook for the company. So firstly, to 2021 performance. As David has outlined, the '21 financial year represented a period of rebuilding and from the challenges associated with the miss management and fraud, which came to light at the end of the previous year. We continued to see significant impacts from COVID related restrictions on government spending and on business development and travel. And we also saw slower uptake of anticipated water remediation projects that we had on our books at that time. In the 12 months to the end of December 2021, the company generated $6.3 million worth in revenues and a gross profit of $3.6 million. Elevated expenditure on interim management, restructuring, legal and audit costs and higher freight costs contributed to a net after profit tax loss of $3.9 million for the 12-month period. We closed the year with $23 million in cash in the bank. The considerable cash burn over the past period and the cash outflow we have advised in earlier this week's announcement is noted by management and directors. While reserves are sufficient to enable the business development to continue as planned, prudent decisions are being made to conserve cash and manage costs wherever possible in the short term. And now just a bit of an update on the regions. A significant portion of our time -- management time in FY '21 was devoted to the restructuring of China and implementation of improved company-wide systems and processes. We also continue to progress our reviews into our commercial operations, our R&D program and manufacturing and supply chain and importantly, our people and culture. These reviews directly support our growth strategy, and I'll touch on these in a little while. From a business perspective, the highlight of the year, as David mentioned, for '21, was the successful application to over 1,000 tonnes or more of Phoslock to Kralingse Plas Lake in the city of Rotterdam in the Netherlands. This represented our largest European project to date and with the positive results and the enthusiastic feedback from the city of Rotterdam authorities, it's already increasing our profile and opportunities in Europe. So I'd now like to show you a video, if we can. Yes, please. [Presentation]

The way [ ended ] with it's as simple as that. It was actually a pretty involved project, as you can imagine, but that's the typical Dutch way of complementing everything they say exactly how they think, but he's been a great advocate for us, and that project was a huge success and it was conducted in a couple of weeks in November last year and the results, and we monitor that every month, since it was applied, and the results so far have been excellent. I was lucky enough to visit it in February of this year, and managed to speak to a couple of business owners around the lake. And 1 of the knock-on effects that we don't think about is their business that improves as a consequence of that lake being improved. So -- so that's where we're focusing a lot of our efforts on in some of the stakeholders around lakes that can benefit from those type of improvements. So all in all, a great project. And as I said, really has kicked off our bigger and better and brighter footprint in Europe. So a great project. And, as I said, is a strong advocate and continues to be so. So that was Europe. In the U.S., '21 was disappointing. It didn't meet our expectations. David touched on that. As a result, we have restructured our commercial operations in the U.S., and we're well advanced with improving and increasing our distribution footprint in the U.S. We've already received orders from a number of new distributors and new trial work with these distributors is underway. And I'm also encouraged by some trial work going on in the city of Orlando in Florida, that's also been possible because of this new structure that we put in place in the U.S. Throughout '21, we also did a number of projects in Brazil. Again, I think David mentioned this, and those projects are either annual treatments that are obviously ongoing or new leads that Brazil has found. And Brazil, as you know, remains a very important market for us. Interestingly, in South America, we secured some projects in Uruguay, and we've received a lot of interest in Ecuador as well. So South America continues, as I said, well, I mentioned Brazil, but South America itself is an important market for us. We completed a number of projects here in Australia through '21 and in Queensland, Lake Hugh Muntz and in Western Australia, a number of projects as well. And we were planning to treat a lake in Auckland in New Zealand. However, COVID restrictions prohibited that treatment. That treatment will get underway in the next few months, pending freight issues, I'm told by the guys of getting freight to Auckland. In China, as David mentioned, we had a focus on resetting the business with a largely new management team and a refreshed go-to-market strategy. While the sales in China were disappointing, and again, below expectations. I am confident we now have the team in place to succeed in rebuilding that business to put in place new channel strategies and put the business on a solid footing. Of course, adhering to standards that we expect from all our operations around the world. The Chairman did note this as well. It will take time, and we'll continue to monitor our business in China regularly. So if I move to briefly try and recap now on the reviews that I mentioned earlier. Firstly, I wanted to start with the commercial activities. And again, I think the Chair touched on this. So we reviewed all our capabilities and market access strategies in all our markets around the world. We've made changes to most of our sales and distribution strategies and setups in our key target regions. We moved from a third-party distributor, which was SePRO in the U.S. and appointed our own commercial lead, Harry Knight. He was appointed in January of '21. And we're now in the process of recruiting some additional salespeople to target key geographical states of the U.S. And as you can imagine, the U.S. is a big market. So we're targeting Florida and the mid-northwest. So the Chair also mentioned, I believe, Damian Whelan. We appointed in Europe as our commercial lead, and he's supporting the growth and expansion plans there. represents a really important step towards our presence in Europe, and Damian comes from an extensive water experience and remediation background as well as a strong commercial bent to his history. We're also looking to improve or recruit additional sales resources in Europe. And I have a video now from Damian filmed in the bright English sunshine, as you can see, and we'll play that. [Presentation]

Good morning, Lachie, and thank you for a warm welcome. Good morning also to our shareholders. As Lachie mentioned, my name is Damian Whelan, I'm the General Manager for Phoslock in Europe. I've been positioned out for 9 months, and I am excited today as I was when I first started. It's a pleasure to be speaking with you at this year's AGM. I hope I can provide you with a short overview of PET Europe, how we finish 2021, our journey and the positive directions taken. I will briefly touch on our business plan and strategic objectives, alongside the creation of 4 new service verticals designed to drive growth and create the long-term partnerships we did with our clients. Europe is an exciting region for Phoslock and 1 that plays a key role. To date, we have great examples of water remediation projects across a wide range of lakes and waterways from managing the chemistry, lake bed sediments, to water catchment loading. We finished 2021 in a strong position. We completed 3 applications on time, on budget with 0 lost time incidents to an ever-changing COVID pandemic. Our biggest application was Kralingse Plas where 1,064 tonne was applied during the month of November. Yesterday, I was back at the Karingse Plas discussing 2 smaller lake applications to be treated with Phoslock this year. 2022 has seen a great start to there too. We've undertaken reapplications to ensure waterways stay healthy as we approach Sprint. We've been informed current trials from early 2021, have resulted in postop chosen choice of technology and seen interest in Phoslock for potential new guys to grow, and more importantly, from new European countries such as Finland, Sweden, Spain, Italy and here in the U.K. All wanting to understand how Phoslock can play key part in both their short- and long-term maintenance plans. I mentioned earlier about our business plan, strategy and the creation of 4 service verticals. Our business plan has set out the future objectives needed and for those requirements for achieving success and is supported by 4 new service verticals PAS, CALM, RADS, CAP. PAS is our projects and application services designed for all new projects and inquiries. CALM is our consultancy and lake management designed to provide consultancy, ongoing support and maintenance to late already treated. RADS is our retail and distribution sales, establishing further partnerships with distributors. CAP is our certified and approved partners, creating multiple opportunities to deliver multiple projects through verified partner status. These new service arms provide a dedicated and structured approach, operating under our guiding principles, ensuring we support and continue to work closely with our clients today, tomorrow and beyond. From experience, a problem solved is sometimes a problem forgotten. Structuring our approach to ensure we continue to work closely with clients ensures we don't get forgotten and become the partner of choice and achieve a trusted adviser status. Before I hand back to Lachie, I would just like to update you all another area we have been working on in the last few months. We have generated interest outside of lake early applications and choice for our technology has come from various water companies multiple industry sectors, all wanting to understand if Phoslock can assist with nutrient challenges they are facing now and in the future. We will explore this interest to see if we have real growth potential, whilst at the same time, positioning our strong brand capabilities, heritage and end-to-end expertise for a wider and make new audience for Pet. Thank you for the opportunity to speak with you all today. And with that, I should hand you back to Lachie. Thank you.

Here we go. As you can tell, Damian is a bundle of energy. I actually said, keep your presentation short. I think you heard he speak fast, but I'm not sure which he goes to, Mr. Chair. But anyway, Damian is doing a great job, and we're really excited about the opportunities in Europe. In South America, moving on with the commercial partner. In South America PET's license. In Brazil, Hydroscience continues to perform well, as I mentioned, and new leads and applications are building steadily. I think it is important to note that as markets continue post -- continue to open post the COVID travel restrictions, we will invest in a high level of business development and sales activity across all these regions. Our growth strategy is centered on diversifying our business on a geographic basis and is critical, we support those growth ambitions by ensuring we have the right resources in place to secure the new business. If I move to R&D now. During FY '21, we completed a review of our R&D programs, which see a more focused and disciplined approach to our investment in this area. We know we need new products in our pipeline and new products for our commercial offer to access new market segments. We've categorized our priority projects is either core, transformative or adjacent and we've set strict criteria for supporting investment decisions in those in prospective additional projects. One of our key objectives has been to secure products that enable us to address the flowing water segment, which is a key segment for the company. And I'm pleased to announce today that we have recently -- as recently as this week, entered an MOU with as a leading technology provider in the U.S. MOU or memorandum of understanding relates to PET securing existing -- exclusive distribution rights for 2 exciting new products that will give us a position in managing excess nutrients in flowing water. The products are already being used in industrial settings are nontoxic, exceptionally high phosphorus and other pollutant absorption capacity. So I'm sure shareholders will note that adding this type of -- or these types of products to Phoslock's market offer will add -- will complement the business and add a significant platform as we go to discuss with customers. So it enhances our commercial offer and enhances our position with customers who often talk to us about we can treat the Lake Shore with Phoslock, but what about the inflows. We'd like to be able to do something there. So the addition of these products to the business is a significant step forward. We hope to conclude the negotiations with the guys in the U.S. in the next few months. To look at manufacturing and supply chain. And clearly, having a reliable, cost-efficient supply chain is integral to the success of the business. We've made some important changes in the management of our Phoslock manufacturing operation in China. But the review into this area also identified, as David mentioned, that we should establish or look to establish the second manufacturing site to support the growth of the business elsewhere. And we recently announced a preferred location for this site as Casper in Wyoming in the U.S. The reason we chose Casper fundamentally is that bentonite supply, the raw ingredient for Phoslock is abundant around that area. It is located near a freight hub and the cost to manufacture is -- has significant advantages. So last month, we signed an MOU with Advanced Casper, which is a development arm of the city. -- which allows us to move forward and fully evaluate the building of a full production site pending future demand. We are proceeding with the detailed design work required to complete our assessment of this option. Given the early indicative costs, estimates for this are around $10 million to $11 million range, it is critical that a solid business case exists to justify this investment. And I want to assure shareholders that we won't proceed with this second manufacturing facility unless we have the business case to support it. And if required, we have the suitable options available to fund it. In the short term, our other manufacturing measures are being taken in China as the Chairman noted, the Board approved earlier this month a further investment of approximately $1 million which will enable the manufacturing plant in China to reach a capacity of 6,000 tonnes per annum. This capacity equates to a level of sales required for the business to break even at current cost. The capacity increase will be critical in the short term as we build the sales pipeline and continue to evaluate the proposed new facility in the U.S. People, performance and culture. And given, again, the significant challenges we recently faced by the business, including the incidence of mismanagement, it was critical we looked at -- took the time to review our visions and values and develop a framework that supports the capabilities and enhances our culture. We engage some expertise outside the company for this and we have now identified and committed to a clear aspiration for the company, identified the tools and resources needed to attract and support experienced and capable people and undertaken a candid review of the culture, both of our Board and of our management team. Coming out of this review, we've invested in strengthening PET's management capabilities by the recruitment and appointment of some very important new hires, and as you know already, a refreshing of the Board. These included the already announced appointments of Simon Greaves as Group Executive of Operations; and Dr. Kate Waters-Hart, who returned for maternity leave as Group Manager, aquatic science. Kate is based in Scotland. Simon's based here in Melbourne. In our R&D area, we also engaged the services of Dr. Michael Doyle on a contractual basis. Michael comes to us with significant experience in R&D and is already making significant contribution to our product development and the efficient plans to bring those products to market, as you can tell by our recent announcement from the U.S. Michael also takes on the commercial role for ANZ. Together with a number of recent appointments in the sales and distribution area that I touched on before, the addition of Simon Michael and Kate will add significant benefits to the business. Throughout '21 and '22, 2 of our long-standing managers left the business. Some of you guys would know Nigel Trail who was responsible for the international sales, Nigel resigned in March of last year. That remains very involved with PET with his current role as the CEO of LSI, which is immunological Solutions Inc. and they are scientific advisers and do a lot of advising work with PET. So Nigel remains very involved still. And Andrew Winks resigned as well in February of 2022. Andrew was the operations and R&D manager at the time. Both of them had significant time with the company, and I wanted to thank them both for their involvement with the company. Also in November of last year, we -- Jason High, who some of you might know as the manufacturing manager in China, he resigned as well. Sorry, to that slide. The outlook and focus before I hand back to the Chairman, the outlook for the business and noting that the Chairman has already outlined the 3 phases in some detail, I won't repeat those. However, as I -- as we stated when we released the full year results, the short-term outlook remains somewhat challenging from a revenue perspective as we look to rebuild our sales and execute on the growth strategy. However, over the FY '22 period, we do see significant positive opportunities in many of our markets, particularly the U.S. and Europe. To some extent, however, these will be tempered by abnormal costs with finalizing the legacy matters and shareholders should note that rebuilding to profitability will take some time. We're continuing to invest in our sales resources in effort in both Europe and the U.S., as I mentioned, as these geographies are significant to the long-term prosperity of the company. David mentioned registration work continues in Canada. But as we've said before, this is taking time as we negotiate and discuss the positions with the Canadian authorities. The Canadian market is an important market for PETZ. So we will continue those discussions as quickly as we can. In China, we continue to review our direct-to-market strategy and we put in place alternatives to evaluate the best options. We note the collection of sales in China remains challenging and is therefore a strong consideration whenever we're analyzing our options. As shareholders know, this is a difficult business to forecast as sales take time to move from initial engagement and trials to confirmed orders and many factors can impact that timing. Given these uncertainties, we do not believe it is prudent for the company to be providing specific earnings guidance at this time. However, as I've alluded to, we disclosed an estimated that the business will incur net cash outflows of approximately $10 million in this current financial year. This estimate includes the impact of the manufacturing-related capital investments that I've just spoken about. And I did want to emphasize again that management is focusing on managing costs and conserving cash wherever we can. However, we will continue to rebuild the business and grow sales. And so that balance is critical. Shareholders should be reassured that as we rotate out of COVID-related restrictions and distractions, authorities around the world are turning their attention back to addressing major issues associated with the order remediation. Those issues have become more serious and the challenge of successfully addressing them are more urgent than ever. This is already reflected in the increasing number of inquiries and sales leads we see. PET maintains an important competitive advantage and is leveraging that advantage to secure sustainable and profitable growth over coming years. In doing so, we will deliver value to all our shareholders. Thank you. I'll hand back to David.

Thank you, Lachie. So just to repeat on each item of business, there will be time for questions specific to that agenda item before voting and then general questions at the end of the formal resolutions. So let's start with the ordinary business of the meeting. The -- Item 1, the financial and other reports. I now table the 2021 annual report. To consider the company's financial report, directors' report and auditor's report for the year ended 31 December 2021. There's no shareholder vote required on this item, but we are here to answer any questions or comments, if you'd like to put them forward now. I ask the company secretary if we've got any online questions that maybe we'll deal with those first and then go to the floor.

Thank you, Chair. There are 4 topics, 5 questions, with them now. I'll -- probably Lachie, you can address this. When will the company resume trading on the ASX?

I couldn't have forecasted it. It's -- I think the Chairman has gone through just -- I think the Chairman has already outlined the steps that are involved in relisting. It is, as we've said, our highest priority to get relisted. We have presented to the numerous accounts as audited by Haley and her team in the past 2 financial segments. The Board has just approved again that we'll do another audit of our half year accounts this year. That is a critical component for the ASX, and we've submitted those to the ASX in the previous accounts recently. And we've responded to questions, as David said, questions around cash, cash flow, the amount of cash held as a percentage of our assets, questions to that nature. Our dialogue remains open with the ASX. We're in constant communication literally every day to try and find out what else the ASX will need for our real estate. So in some respects, we believe we're doing and have done as much as we can. We'll continue to make sure our accounts are always at the in pristine condition and supported by Haley, and we'll continue to respond to questions at this point. I cannot give you a date that we're released. However, I can only say we're in constant dialogue. We're waiting now for the ASX to respond with any further questions. And of course, as soon as we're here, we'll advise shareholders of that.

Thanks, Lachie. Same topic. Is the company aware that after 2 years of being suspended, the ASX is within its rights to delist the company?

Yes. We are aware of that. We're aware that September looms as a date coming quite quickly. We hope we do not get to that date, of course. We've investigated what the -- what happens at that point should the ASX decide to do that. We obviously hope that decision doesn't have to be made. But the short answer to the question is, yes, we are aware. And yes, we have looked into what that means, but probably not the right juncture to talk about what that means other than to say we are well aware of the date. We are well aware of making the ASX, well of that, too.

Thanks, Lachie. What further actions are being taken to pursue those responsible for the fraud and mismanagement?

Again, I think the Chairman outlined very clearly what the legal actions are that we've taken recently. I don't think I need to say those again, but they are in -- have been taken recently and that's there the actions that we've done. We continue to review and keep all our options open for any further actions, but we try to balance as the Chairman said, any further actions against the likelihood of success and the monetary value of that success against the cost that those actions might take. I'm sure shareholders would be aware that as we deal and try to negotiate and find information from China, it is a long and difficult process, and therefore, expensive process. So we're mindful of any further costs we incur in the business. We've incurred a lot, as you well know. So we keep our options open. We've told you what we're doing right now. There is also, as you know, an investigation with other regulatory authorities ongoing, which we're cooperating with particularly the AFP. And that's the status, I think, of the litigation and the further actions.

We have a follow-on from that, Lachie. Is the company still incurring costs associated with the investigation?

Yes. So the short answer is yes, we are. The longer answer is what I just said before. Those costs are wherever we can trying to be turned off or down as much as we can, but we are mindful that there are certain things that we must do as a public company and as a company that must operate appropriately to fulfill the obligations, particularly of regulatory authorities and to spend some money to understand all of the issues that the company had from the previous management.

Thank you. The next topic is director-related. Why is Ms. Shanahan being considered for the Board reappointment, given she was the Chair of the Audit Committee during the time of the fraud and mismanagement?

I have to take that one, Lachie. Look, I understand the view that some shareholders have expressed that a completely new board would be desirable. However, as Chair, I've had to balance the competing needs of the company between a completely clean break of the past and our need for continuity and stability. The Board is new, and as a collective understanding of the company, going back about 12 months. In order to satisfy the needs of the Australian Federal Police, ASX, ASIC and others, we've had to address in detail issues, transactions, people and events going back well before our time. Without the help of Brenda and her historical knowledge, we would be at a serious disadvantage. She's provided us with invaluable insights and information, but we needed in order to reconstitute our financial statements and satisfy the questions of various government bodies. It's also important to note that she was responsible for recruiting Lachie and our new CFO, without which I don't know where we would be. Having Brenda around the Board table has enabled us to transition to new management and a new Board regime. And having her serve another term will complete this transition. She is our longest serving director, and I think it's in the interest of our stability to use her corporate history, her business acumen and a knowledge of the company in history for us to complete the work that we need to do. And therefore, our whole heart will be supported and asked to stand for longer term.

Thank you, David. Since I've started asking questions, there's a few more, so I'll continue on if that's okay. Does the company own any IP on new products so far and will PET manufacture or resell these products? Over to just Lachie.

I didn't hear the first part, Matt, sorry.

Does PET own or does the company own any IP on the new products you discussed?

That's a complex question. The short answer is we do own some IP on some of the products we're developing and some of the IP is owned by the partners that we're working with. So wherever we can, we try to either own the IP or work with a partner that has IP. We are in a competitive space. We all recognize that. So having some of that IP owned by either us directly or by the partners we work with is a critical component to us.