Spectur's H1 results released after market close on 29 Feb had me worried but mostly good news here

• $650k debt paid down to $250k with confidence that the remaining balance can be retired before 31 Dec 2024 deadline
• Positive overall cashflow in Q2 (This included a $440k government R & D credit, which was mostly used to pay down the debt it seems)
• Changeover of old hardware offering to newly released products "did have some impact on product sales and associated services which we expect to be reversed in H2"
• A recent push for government tenders has been successful and should bear fruit throughout 2024 - "Prior to H1 FY24, Spectur generally didn't pursue public tenders or procurement panel opportunities, which limited growth potential in these markets. This half year we have focused on this area with a number of tenders responded to, with two won and a number more expected to be awarded in the next 6 months
• My concerns remain that despite strong gross margins of 55%, slightly increased employment expenses partially ate into the sales gains achieved. Cost control is critical for this business at the moment.

Overall it really does look like Spectur is turning the corner to profitability and finding new sources of sales and product fit that will sustain them into the future. Share price is up 11% since my last post at the end of Q1, but there is still much room for growth if they can put in a strong Q3

Spectur's back with another mixed quarter.

The key detail that led to a 10% SP fall was a further $700k cash outflow leading to a closing cash balance of only $866k. Further, they have $650k of debt falling due on 31 Dec 2024, which will have to be repaid by cash or possibly a dilutionary placement.

But with the bad news out of the way, the green shoots continue to sprout:

• Spectur note that Q1 is always the worst quarter for cashflow due to annual and one-off payments (ERP systems, Insurance, Audit and Tax etc) and that the FY24 outflows are $130k less than Q1 FY23.
• Further, operating cash receipts of $600k were received one week after quarter close, and by 23 October, the cash balance is only $70k below the start of financial year balance.
• Q1 Revenue was a new record high for the company and every month of Q1 set a new sales record, with September sales of $940k being the largest month in company history. YoY Sales were up 36% for the quarter.

Overall it is my belief that SP3 represents good value at these depressed prices, as it has been deservedly sold down whilst it has been churning through cash but has now finally reached the point where it looks like it could be consistently cash flow positive from here. Further, a $400k R&D refund is expected in Q2, which in combination with the record sales quarter in Q1 has the potential to lead to a big positive cashflow quarter which may excite the market.

The key risk to this good value is the cash at bank position. If the current bank balance of around $1.45m were to suffer any significant unexpected outflows, a further highly dilutive capital raising would be required. However, Managing Director Gerard Dyson stated at Q4 that "Notwithstanding that Q1 brings an additional pay-run and one-off expenses, we are expecting FY24 to bring improved cash and earnings performance from prior years. Budget and forecast numbers suggest that we will not need to raise equity for working capital purposes with the current operating model.” We of course must always take with a grain of salt a leader promising that a capital raise won't be necessary, but so far Q1 has more or less followed his outline and I'm positive that a capital raise will not be necessary.