- Strong backlog supports future improvement in cashflow
- Indian MoD contract delays nearing resolution
- Final stage negotiation for large program orders for new locking product
- First orders for Aura IQ Product opens up $300M new market
- Consolidated cash position of $0.9m
Ava Risk Group Limited (ASX: AVA), a market leader of risk management services and technologies, today released its Appendix 4C for the quarter ended 31 March 2019.
Reflective of the previously reported delay in orders received during Q2 FY2019, along with payment terms (timing) of orders received, net operating cash flows were negative $1.9m for the quarter, compared to positive $0.7m during the previous quarter. Cash receipts from customers were down $2.2m on the previous quarter to $7.4m.
At 31 March 2019 the Company had orders in hand (backlog) in excess of $3.6m, and $0.9m cash at bank. Cash at bank was $0.6m below expectations as a cash refund from the AusIndustry R&D programme anticipated to be received during the quarter was delayed, and has been subsequently received in early April.
Excluding cash inflows from customer payments, and other sources, gross operating cash outflows are forecast around $8.7m for next quarter, a $0.4m reduction compared to the quarter just ended.
Ava Group Chief Executive, Scott Basham said: “With a restructure of our management team and a re-focus on profitable growth, Ava is well positioned to capitalise on our strong base of leading products, increasing gross margins and a large order book to support a greatly improved and profitable Q4 FY2019 and FY2020”.
The softer than expected booking of orders in H1 by the Technology Division has seen an obvious follow on tightening of our cash position in Q3.
The delay of inflows originally expected for the Technology Division from the Indian MoD order, has impacted short-term working capital. However, recent purchase order activities by the Prime Contractor in India on this project with other sub-suppliers and OEMs, indicates that a level of momentum is now very much underway.
Our expectations remain that the revenue forecast for this project in FY2019 (A$500k to A$1.5M) will be forth coming in Q4 FY2019, with the balance of the USD$10.5M to USD$11.1M (A$14.8M – $15.7M) to follow in FY2020.
The business has restructured its management team to reduce overhead, right size our cost base, and manage our reduced working capital position. Ava Group has achieved on-going cost savings compared to H1 FY2019 of $1.2m p.a. This is in addition to the $1m p.a. achieved following the acquisition of MaxSec Group last year. The business is fundamentally well positioned for growth and future success, with a strong backlog of purchase orders received in Q3, currently in excess of $3.6M, the majority of which is remains on track for delivery this financial year.
Included in the Q3 backlog is the first purchase order for $249K, under the agreement with Dept. of Human Services (DHS) for Electronic Access Control System (EACS) card readers, with the bulk of this $1.8M project being expected to be delivered in 1H FY2020.
The Technology Division is also currently in the final stage of negotiations with a major overseas customer for a significant (5 year) long term order to deliver large-scale fixed monthly quantities of one of our world-leading and award-winning locking products. This order will require a sizable expansion of specific parts of our existing production capabilities to meet not just the supply demands of this order, but the expectations of similar large-scale orders from elsewhere around the world for this unique product. This specific order will significantly change the underlying size of the business and will create strong profitable revenue streams for the company going forward in FY20 and beyond.
The Technology Division is also in the final stages of preparations to launch our new Aura IQ product for conveyor belt assurance monitoring. The first customer orders have been received, and installations are underway. The Aura IQ solution opens up a new $300M+ revenue market opportunity for the Technology business.
Total Technology Division revenue is still forecast to be in excess of A$18.0M for FY2019.
The Technology Division continues to forecast it will be EBITDA positive in 2HFY2019 and is confident of increasing its revenues and delivering profits in FY2020 and beyond.
Total Services Division revenue forecast for FY2019 has reduced slightly to A$16.4M to A$17.1M.
The Services Division is forecasting to be EBITDA neutral in the current quarter.
About Ava Group
Ava Group is a market leader of risk management services and technologies, trusted by some of the most security conscious commercial, industrial, military and government clients in the world.
The Group features a range of complementary solutions including intrusion detection for perimeters, pipelines and data networks, biometric and card access control, a range of high security locks as well as the secure international logistics and storage of high value assets. Through decades of innovation, the Ava Group continues to build upon a comprehensive portfolio of premium services and technologies for the most complex and demanding markets.
Our business truly serves a global market, with our knowledgeable team spread across six continents, providing market and industry expertise directly to customers. With thousands of sites protected, the Ava Group is proven to deliver first class services and technologies that surpass the expectations of our partners and end users.
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