@peter2480, as you raised this, it would help Hot Copper followers of ACF to see the explanation provided by ACF in the half year report Note 2 (i):
"The Statement of Financial Position shows that as at 31 December 2020, current liabilities exceeded currentassets by $7,716,726 (June 2020: net current liability position of $1,974,004) for the Group.
The increase in deficit arises due predominantly to the following:
(i) The current loans and borrowings increased from $5,981,098 at 30 June 2020 to $8,071,425 as atDecember 2020 being an increase of $2,090,327. In addition, lease liabilities increased from $3,420,761at 30 June 2020 to $4,138,643 being an increase of $717,882.
(ii) Purchases of plant and equipment of $6,387,879 during the period ($4,867,033 in the prior comparableperiod) was financed through the use of cash and an increase in trade creditors. Trade creditors haveincreased from $16,234,858 at 30 June 2020 to $17,602,817 as at 31 December 2020.
The directors are confident the company has a number of alternative funding options available if required tocover the deficit including operating cash flows that will be received off the capital expenditure undertaken duringthe period. Total operating cash flows for the 6-month period was $5,673,741. The group has also the ability ifrequired to divest existing idle property plant and equipment and significantly reduce its capital expenditure.Total written down value of property plant and equipment at 31 December 2020 was $77,407,139 and total netassets as at 31 December 2020 was $59,601,343.
In addition, the group has access to an overdraft facility of $1.7m that can be used for short-term working capitalmismatches."
The current high operating cash inflows, which should increase further as a result of large new contracts and from investments in plant and equipment, should result in the current ratio being much improved by June 2021. But yes, it is something to be aware of and monitor closely. Thanks for that.
ACF Price at posting:
37.5¢ Sentiment: Buy Disclosure: Held
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