Probably worth more attention, page-9

Based on FY 23 results*, Shape has now a free cash flow yield of 26.5 %.
The main question is whether this free cash flow is a one off.

Looking at the last 5 years, Shape had a positive cash flow from operation every year (the average of FY 19 and FY 20 was even higher than FY 23), except in FY 22.
Interesting to see that the negative cash flow from operation in FY 22 (- 20.6 m $) was fully explained by a large increase of working capital (effect of - 27 m$ on the cash flow from operation).
This increase of the working capital in FY 22 seems to be a one off, as Shape has a business model with a negative working capital (no inventory and customers paying in advance). So any increase of revenue should generate cash flow in such a model.

In fact, I expect the free cash flow to increase in FY 24**, due to 2 main elements :
- an expected EBITDA increase driven by higher revenue and higher margin***,
- cash flow generated by their negative working capital model, when their revenue is increasing.
The company may also benefit from higher interest rate, as they have a high level of net cash (85 m $ at 30/6/23).


* free cash flow of 19.6 m after 1.9 m$ of lease repayment.
** in the absence of one off, like possible payment defaults by some of their customers.
*** at their AGM (23/11/23), their chairman indicated again "focus remaining on margin improvement".