good news ???, page-3

Nice result - looks like a lot of hard work went into that. But that balance sheet just shows what an arduous task they have ahead of them!

Anyway, well done to management and hope they don't exhaust themselves on this challenge. The need to pay down debt is clear - EBIT cover is tight and bank covenants may well have a ratchet in them?

Options:
* Increase EBIT -probably difficult to do without capex if they're already running a tight ship.
* Pay down debt from NPAT - very slow process at current levels, and risky that interest rate rises may eat into NPAT in the mean time.
* Extract more cash from working capital - suspect this has already been pushed hard, but you never know...

Overall, any of these options would suggest a very drawn out recovery before the company was on a footing to expand and no longer vulnerable to a "glitch".

Therefore, I think they will want to raise new capital to reduce debt as soon as they are able - perhaps in the region of $5-$8m. Just my opinion. Still, I think this management deserves the markets backing - investor sentiment in this one is likely to be self-fulfilling.