Ann: Operational Update, page-10

A bit of fundamental stuff here for those interested (someone correct me if I'm dead wrong): The catalyst for any capital raising will be the revised covenant suite advised in the 31/12/14 HY.
That was: Gross Debt: EBITDA of 4x or less from 30/9 through 30/12 of 2015. There are also debt reduction covenants but I have to assume they're being complied with currently as I think a breach would need to be notified to market (closely followed by a cap raising notification!). All other covenants were suspended until at least 31/3/16 so let's just focus on Debt:EBITDA.

Gross Debt at the time was a bit over 97m, so let's say 98m. This includes the current portion of the debt. A quarter of this is 98/4 = 24.5m. So start with that as a target for EBITDA.

EBITDA as measured by the banks is Normalised LTM and the first half normalised figure was about 9m. That leaves a shortfall of 15.5m. So the first question is whether you think ANG can generate 15.5m EBITDA in the second half and get to 4x by 30/6 (ie early). Probably not. If they're able to maintain margins and grow as recent announcements suggest, they could hit 11-12m (imho) giving 20-21 for the FY - but that's not the whole story.

ANG is generating operating cash and had 10m in the bank at the HY which is a bit more than it really needs for working cap (imho!). Operating cash was 5.2m for the HY. So you have maybe 3m cash you could apply to debt plus maybe 6-7m of second half operating cash which could be applied to debt. That gives 9-10m debt reduction as at 30/6. Another 3 months gives maybe another 3-4m operating cash which could also be applied to debt before you get to the first covenant test date (30/9 per above). Best case you end up with Gross Debt maybe 85m (but probably closer to 88m) meaning you need to get an LTM EBITDA of 85/4 = 21.25m (or 22m if 88 debt). I don't know the specific terms of the recently announced contracts but if ANG receives any deposit upfront cash this could reduce the debt further - but 22m in the year to 30/9 is my target.

I can get to LTM EBITDA as at 30/9 of 22m. It requires growth over last year, but it's growth from what I regard as bottom of cycle for the business ANG is in (not for everyone!) and is in line with the last couple of positive contract announcements and the commentary in the HY financials.

It will all be moot shortly as the 30/6 numbers are announced an we get a clear view on how close it's going to be - but interested in any thoughts.