Hazer Group (ASX:HZR) share price sinks 6% as after-tax loss widens in FY21

Shares in Hazer Group took a dive today after the technology company released its FY21 results

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The Hazer Group Ltd (ASX: HZR) share price sunk deep into the red today.

Hazer shares slumped 6.79% to $1.03 after the technology company reported its FY21 earnings.

Hazer Group share price sinks as after-tax loss blows out by 262%

  • Revenue from ordinary activities increased by 85% year-over-year (YoY) to $2.66 million
  • Loss from ordinary activities increased to $11.66 million from $3.26 million, a 262% change
  • Operating expenditure increased by 41% YoY to $5.57 million
  • Net operating cash inflow of $5.11 million, a 105% increase from FY20
  • Cash and cash equivalents on its balance sheet grew by 43% YoY to $24.64 million

What happened in FY21 for Hazer Group?

In a potential positive for the Hazer Group share price, the company managed to grow revenue from ordinary activities by 85% over the year.

This was coupled with a 105% YoY increase in net operating cash flow of $5.11 million. The gain here was underscored by a "research and development tax incentive rebate" of just under $1 million, in addition to "ARENA government funding" of $9.4 million.

Both funding initiatives were obtained for the company's "Commercial Demonstration Plant Project (CDP)", although ARENA funds are held in a "restricted cash account" until certain milestones are met.

However, in what could be a negative for the Hazer Group share price, the company also recognised a statutory loss that ballooned out to $11.66 million in FY21. This is a 262% loss increase from the year prior.

The company explained the increase stemmed from non-cash items on its income statement, such as the "impairment of expenditure" associated with the CDP. This means that because the impairment was a non-cash item, no amount of actual cash left Hazer's bank account for these "expenditures".

However, the impairment is recognised throughout the income statement, at the net income level. So it ultimately impacts the statutory profit/loss Hazer will report, but not the amount of cash flow.

Hazer also increased its operating expenditure this year to $5.57 billion in FY21, up from $3.99 million a year ago. The company attributes this to "increased finance costs" with its loan facility with Mitchell Asset Management.

In addition, the company also made a number of patent applications that totalled $1.16 million. It also exercised employee benefits of $2.88 million.

Finally, the company left FY21 with $24.64 million in cash and cash equivalents on its balance sheet. This is up 43% from last year.

What did management say?

Speaking on the announcement that is likely impacting the Hazer Group share price, the company's directorship said:

During the past year, the company made significant progress towards commercialising the Hazer Process through advancing the engineering, procurement and construction of the Hazer Commercial Demonstration Plant (CDP) Project. The CDP will be the first-of-its-kind, fully integrated, operational production facility based on the Hazer Process and represents the key next step in fully commercialising the Hazer technology.

What's next for Hazer Group?

The company expects "significant progress" in FY22 as it commissions its CDP. In fact, Hazer is "targeting practical completion" of this project by "the end of Q4 calendar year 2021".

Operations will continue through to CY22 and CY23 for the "novel Australian technology", as per the release.

No specifics on revenue or earnings guidance were provided by management.

The Hazer Group share price has posted a year-to-date return of 28%. This has outpaced the S&P/ASX 200 index (ASX: XJO)'s gain of about 14% since January 1.

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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