CAC 2000 Limited is counting on a delayed refinancing deal to unlock more project work and improve its performance before its financial year closes, after cash constraints helped drive a 57 per cent fall in its nine-month revenue.

The company says the financing would give it more time to repay short-term obligations and provide the working capital needed to carry out projects. Until then, work already won is taking longer to turn into billings.

Management’s outlook for the August to October quarter is “positive but cautious”, with the expected improvement dependent on completing the financing arrangements.

“Should the financing initiative referred to above conclude as currently expected, management anticipates a material increase in project activity and billing during September and October, supporting an improved trading performance for the final quarter of the fiscal year,” the company said in its report to shareholders.

“This expectation is subject to the successful and timely completion of the financing arrangements and prevailing market and operating conditions.”

The report, covering the nine months ended July 31, was signed by Executive Chairman Steven Marston. It says management expects the refinancing with its principal lender to conclude “in the near term” but does not give a completion date, financing amount, or detailed terms.

Although the outlook identifies September and October as the months expected to benefit, the report does not provide actual trading figures for those months or confirm that the financing has been completed.

The immediate challenge for CAC is having enough money available to execute the work it has secured.

Revenue fell to $281.7 million for the nine months ended July, from $655.8 million a year earlier. Management attributed the decline to working-capital pressure arising from the delay in completing the refinancing.

The constraint “limited the pace at which won work could be converted into billed revenue”, the company said.

Securing contracts creates an opportunity to earn but the company still needs funds to carry out the work before it can bill customers and collect payment. CAC has not disclosed the value of the work awaiting execution in this report.

Despite efforts to control costs and earn better margins the smaller revenue base left the company with a net loss of $116.1 million, compared with $73.9 million in the corresponding period last year.

Gross margin improved to 44.7 per cent from 34.1 per cent, meaning CAC retained more from each revenue dollar after direct costs. However, gross profit still fell to $126 million from $223.7 million because of the sharp decline in sales.

General and administrative expenses were reduced by 22.7 per cent, which management attributed to tighter control over pricing, project execution and costs.

There were also tentative signs of improvement within the May-to-July quarter. Management said monthly trading results improved progressively, with July recording the smallest monthly loss of the three months.

It described that performance as “an encouraging, though preliminary, indicator” of the company’s earnings capacity as working-capital constraints ease.

Collecting cash

CAC generated positive cash flow from operating activities during the nine months, supported by collecting receivables and securing more time to pay suppliers.

Trade and other receivables declined to $468.1 million at July 31 from $535.3 million at the start of the financial year. That reduction helped release cash tied up in amounts owed to the business.

Cash and cash equivalents ended the period at $50.4 million, up from $46.2 million at the beginning of the year, even as CAC continued repaying bank loans from operating cash flow.

However, the losses have substantially reduced its financial cushion. Shareholders’ equity fell to $72.5 million from $188.6 million at the start of the year. Total assets declined to $1.13 billion from $1.20 billion over the same period.

The proposed refinancing is intended to ease the pressure by replacing short-term obligations with longer-term financing while providing funds for project execution.

CAC said it would make a further disclosure to the market when the process concludes.