The inventory purchases of $1.892M correlate well with the receipts from customers of $3.832M using the FY2014 gross margin of 52.6%. This indicates a simple maintaining of existing inventory levels in line with customer orders.
In the previous quarter the inventory seems around $300K too low compared to the receipts from customers (using the same gross margin). The possible explanations are that stock was run down or simply the timing of when cash was paid/received making it appear skewed.
The main cause of the negative cash flow seems to be the increase in working capital to $1.482M.
Conservatively the company looks to be on track for achieving sales of $15M+ for a profit of $1M+. Net income of $314K during the quarter is a fantastic result.
If the directors can use the funds of the capital raising judiciously and continue to be disciplined in executing their business plan then there looks to be plenty of upside to the current share price.
MLA Price at posting:
7.0¢ Sentiment: Buy Disclosure: Held
