"Do you know if the grants are likely to continue for the...

"Do you know if the grants are likely to continue for the foreseeable future, and/or care to predict when working capital is likely to stabalise?"

I have no idea how long the company will continue enjoying the benefits of taxpayer support for its development efforts. (That it has continued as long as it has suprises me, so I'm clearly unable to add any value on this subject.)

However, I'm happy to comment on the working capital matter: while I'd need to look at the full set of financial statements to be 100% certain, based on the information we have, it looks as if there was a rather large working capital increase in the half, by as much as $0.8m:

DH2023 NPAT of $0.788m would translate into around $1.0m EBITDA (the company won't need to provide for tax, interest on leases is negligible and D&A amounts to around $0.2m).

Looking to the cash flows, we know that they won't need to make tax payments, interest is negligible, so all of the $1.0m EBITDA should drop through to the Operating Cash Flow line.

And we know they spent $0.2m on PP&E in the half, so it means the Net Cash position at the 31 Dec 2023 balance date should be around $0.8m improved compared 30 June 2023.

But it isn't; it's basically unchanged.

The only explanation is a meaningful investment in working capital (as I say, the true extent of it is not possible to know without being able to conduct a reconciliation of the complete set of financial accounts, but I am confident in saying it is not immaterial).

By my estimates, the company will have exited DH2023 with Working Capital-to- Annualised Sales somewhere around 25%, which is a lot higher than the historical average of <20%.

Concluding:

While a business model such as this one will always have a reasonably long supply chain and cash cycle, I do think that the working capital curve is currently ahead of the Revenue/Earnings curve, and I expect that to normalise before long... probably within the current half.

So I see meaningful improvement in organic Operating Cash Flow in the coming half-year. Or the one after it.

So if a looming capital raising is your concern, then I think it is unfounded, because I don't see any need for it and, anyway, given the cheap value of the stock, equity is currently an expensive form of capital for this company.

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