I think a capital raising is inevitable sometime in the next...

I think a capital raising is inevitable sometime in the next say 6 months.

Having looked at the numbers again and in particular trying to get a better understanding of the Balance Sheet it seems to me they are likely to make a cash flow loss this year of anywhere between $10 and $20M which the balance sheet does not have the capacity to fund.

Whilst they keep touting the $30M cash on deposit, if you look at the current liabilities, which by definition are due and payable within 12 months, and leaving aside Trade Debtors, they have $33M potentially coming due and payable.

As James has highlighted the majority of that is “deferred revenue” which seems to relate in the main to the PDVSA legacy issue. I am not familiar with the background to this but last years accounts explained that Deferred Revue related to :

Current deferredrevenue represents remaining pre-payments made primarily by PDVSA upon enteringinto a multi-year contract with the Group in 2015 and payments obtained fromthe Ivory Coast project that will be released according to the payment schedulein the next 12 months.

From further reading of last years report it seems we were originally pre paid $95M back in 2015 for work to be undertaken, work that was never completed and is now the subject of a dispute.

I assume this is also why the recent report (and the one prior) contained these words :

The Group was party to several claims during the year.With respect to claims brought against the Company, Fluence will vigorouslydefend itself and is confident they will be successfully defended. There issignificant uncertainty as to whether a future liability will arise in respectof these claims. The amount of liability, if any, is not disclosed on thegrounds that it can be expected to prejudice seriously the outcome of thelitigation. The directors are of the opinion that the claims can besuccessfully resisted by the company.

Perhaps others may be able to enlighten me and ease my mind, but the way I now see things are :

1. The balance sheet is overstretched and will require fresh capital to “clean it up” as much as to fund cash flow losses.

2. Hopefully any capital raise will be able to be made on the back of some good news (preferably out of the US).

3. Because of the above, I am not a buyer at present as I would rather use any new money I tip in to fund the clean up and strengthening of the balance sheet..

All just my views of course.