Ann: Quarterly Activities/Appendix 4C Cash Flow Report, page-4

Q1 FY23 Key Financial Highlights

• Q1 FY23 sales for the consolidated group totaled $20.9m, comprising $16.7m from the
Halo group excluding THM and $4.2m from THM on a standalone basis;
• Q1 FY23 sales were 42% up on the prior quarter including the contribution from THM
and a strong 14% increase on a like-for-like basis excluding THM;
• Sales of $4.2m in THM are in line with the prior corresponding period of Q1 FY22,
correlating to the seasonal low Winter quarter;
• Cash receipts from customers for the quarter totaled $19.7m, being $15.4m from the Halo group excluding THM and $4.2m from THM. Customer receipts from Halo (excluding THM) were lower than anticipated due to the overdue accounts of a number
of debtors in both Australia and New Zealand. These overdue accounts due for
collection in Q1 FY23 total $4.3m. Subsequent to quarter end and through the course
of July, $3.2m of the outstanding amount has been collected, however, is not recorded
in the accompanying Appendix 4C for the quarter ended 30 June 2022;
• The late payment by debtors in the business for monies due to be received through Q1
FY23 is attributed to global supply chain challenges (as cited by Halo’s clients) and the
flow-on effects throughout the industry. As stated above 75% of the outstanding
balances have been collected in July with the remainder expected to be collected in
due course;
• The timing lag on collection of overdue debtors beyond the quarter end has artificially
increased the net cash outflow from operations for the group to a total of $4.7m and
is further compounded by one-off professional service fees of c.$1.0m (included in the
$4.7m net outflow) relating to the acquisition of THM. Had the debtors been collected
on terms through Q1 FY23 (overdue debtors accounted for 91% of the cash outflow)
and the one-off costs normalised, Halo would have been cash flow positive for the
quarter from operations;
• Product manufacturing and operating costs within Halo (excluding THM) eased 8%, a
significant reduction in the current high inflationary environment, from $17.3m in Q4
FY22 to $15.9m in Q1 FY23. Halo has a disciplined working capital management
strategy and is working diligently to address procurement and logistic challenges while
simultaneously reducing inventory balances, thereby releasing working capital into
the business;
• Staff costs significantly reduced on a like-for-like basis through Q1 FY23 compared with
Q4 FY22 as shift patterns normalised following the loss of manufacturing hours in Q4
FY22 due to COVID absenteeism; and
• Advertising and marketing costs for the quarter were $963k, principally driven by THM
and in line with THM historical marketing spend.
As at 30 June 2022, Halo had a combined cash balance of $4.5m. The funds raised through the
capital raising in Q4 FY22 plus the $13.0m of new debt funding raised from Arrowpoint Capital
(backed by the Victor Smorgan Group) were utilised towards the acquisition of The Healthy
Mummy and working capital initiatives.