Ann: Investor Presentation, page-3

"Some more detail on the $60m revenue target . Easy to get there via acquisitions, hard to see how they do it organicallly. And a placement for growth may see some more liquidity which most small cap managers need. ""

Concur.
No way getting to $60m Revenue by FY2025 can be done by pure organic means.

So if we know they are going to acquire their way there then the big question is, "Well, how do they fund the acquisition strategy?"

And part B of the question, "To what extent, if at all, would they need to come to the market for fresh equity capital?"

By my reckoning, they would need to supplement the organic growth with the making of around $35m worth of acquisitions in order to get to $60m Revenue by FY2025 (assuming 5% pa organic growth on FY2023's $39m Revenue and a Revenue acquisition multiple of 2.0x, so [$39m *(1.05)^2] + $35m/2).

The company has around $5.0m of Cash at the moment, and if we assume - conservatively - that $5m figure will remain unchanged overt the next two years, then the company will have Net Debt of $30m under a 100%debt-funded acquisition scenario.

By that stage, and assuming the EBIT Margin is maintained at around 20%, at a Revenue run-rate of $60m the business will be generating around $12m in EBIT and $16m in EBITDA.

These assumptions and outputs are summarised as follows:




As can be seen, the outworking of this 100% debt-funded acquisition scenario would be Net Debt-to-EBITDA of 1.9x and Net-Debt-to-EBIT of 2.5x in FY2025 (yellow shaded area).

These are eminently manageable solvency metrics and, with a highly cash generative business such as this, the balance sheet self-repair in relatively short order.

So my numbers tell me that the company could easily get to management's "$60m by FY2025 Revenue" target purely by leveraging the balance sheet and without any recourse to shareholders.

Management could debt-fund all the acquisitions, but will it?

Knowing the innate conservativeness of the management team and board, I somehow doubt it. I think the maximum Net Debt to EBITDA that would be tolerated would be around 1.0x

That would imply the need for an equity capital supplement of around $14m or $15m.

But I don't think that quantum will be called up all at once; instead, it will be in stages dependent on acquisition size and timing.