$27.5m Revenue Run Rate, Profitable, $1.5m EV, $2.2m Cap, page-5

I am not sure how you got your numbers. Revenue in 1H was only $11.7 million for an underlying net profit of $179000. If you are just multiplying the last quarter by four that is too high. It was just the lag in revenue coming in from new contracts after poor revenue in the first quarter.

The last quarterly suggests expenses in 3Q of $5 million. This tends to be a good revenue quarter for seasonal reasons (payments received for extra work over Xmas), but I would guess at revenue of $23-24 million for the full year 2018-19 looking at the previous year's revenue plus announced new contracts (ie around $6 million per quarter in second half). If you double expenses in 1H (excluding the one off insurance expense) expenses would be $22.8 million for 2018-19.

That suggests an actual headline net profit (adding in the one off insurance expense of $450000, depreciation and finance costs of $200000) of anything from a small loss to maybe $500000 at best for the full year actual profit in 2018-19, though underlying profit would be higher.

It is a good base to build on, but we need more contracts so revenue rises again next year and we start generating higher profits. I will be looking at the quarterly to see if we can get near the upper end of that revenue range. We need over $6 million this quarter given this is a seasonally strong quarter.

Put another way our gross profit margin is about 19% and fixed costs around $4 million. So to earn your $1.75 million (excluding the one off insurance cost) we need revenue of $30 million. At a gross profit margin of 19% this generates a gross profit of $5.7 million less the $4 million fixed costs. We are a long way short of that and need substantial new contracts to deliver your profit number. Note this ignores tax as the last annual accounts had $2 million in unused tax losses etc.

I am nervous that if there is a big minimum wage rise encouraged by an ALP government some of our contracts are linked to CPI rather than wages. Given the low CPI that is bad news for gross profits in the short run.