Cash drained to zero, equity off 75.7% as MEE plans NZ$2.78m raise

Cash and equivalents fell from NZ$2.3m to zero, total equity dropped 75.7% to NZ$4.6m, and gross borrowings rose 11% to NZ$13.7m. Alongside the result, the company flagged a debt restructure and a capital raise of up to NZ$2.78m.

Revenue fell 36.8% to NZ$2.3m, classified below the historical range (4-period mean +137.8%, range -31.7% to +469.6%), with the Honey segment dropping from NZ$2.5m to NZ$1.2m and the segment's share of revenue falling 29.9 percentage points to 39.9%.

The operating-EBITDA loss narrowed 27.7% to NZ$2.2m, but PBT and NPAT both worsened 24.9% to NZ$-7.3m because of a customer-related write-down sitting below EBITDA, per the release.

With cash at zero, gross borrowings of NZ$13.7m and equity of only NZ$4.6m, the proposed NZ$2.78m raise plus debt restructure is the gating event for the next twelve months. The result cannot be read independently of those terms because operating cash burn was still NZ$1.9m in the half.

The EBITDA improvement is genuine but the NPAT signal is worse. Cost-out drove a 27.7% narrower EBITDA loss, yet a customer write-down (referenced in the release) drove PBT down 24.9%. The cleaner operating read is the EBITDA improvement, but the write-down materially erodes the equity base that the raise must rebuild.

Receivables collection has stretched to an unprecedented level. Trade debtors grew 25% to NZ$2.1m on a 36.8% smaller revenue base, pushing debtor days to 170.4, well above the historical mean of 109.0 days and the prior range of 86.2-144.7. On a small revenue base, this represents real cash tied up at exactly the moment liquidity is tightest.

The historical second-half pattern from FY23 has HY23 representing only 45.7% of full-year revenue, implying a heavier second half (NZ$4.3m of H2-23 revenue versus NZ$3.6m of H1-23). Annualising current-half revenue of NZ$2.3m gives a run-rate of NZ$4.6m, materially below FY23's NZ$7.9m, so the question is whether the proposed restructure stabilises the business in time for any second-half lift.

What the release does not support is any judgment on whether revenue has now stabilised, because the Honey segment decline is large enough that mix-shift continues to reshape the underlying business.

EBITDA cash conversion of 86.4% is at the lower edge of the historical range (4-period mean 145.9%), so less of the EBITDA improvement is showing up as cash. Working-capital movement of NZ$-1.0m is within the historical range, but that masks an unprecedented stretch in debtor days, suggesting the working-capital flatness is balance-sheet positioning rather than a cleaner cash result.

The result is also flattered by what is excluded from operating EBITDA. The customer write-down and other below-EBITDA items take the loss from NZ$2.2m at EBITDA to NZ$7.3m at NPAT. Inventory of NZ$14.2m on annualised revenue of NZ$4.6m equates to roughly 1,138 inventory days, within the historical range but still a very large absolute stock position relative to current sales velocity. Capex was negligible at NZ$0.0m, so the OCF improvement was not bought through investment cuts, but the FCF/NPAT conversion of 26.6% reflects how much of the loss is non-cash impairment rather than durable repair.

This briefing cannot assess whether the proposed capital raise and debt restructure will be completed on terms that preserve existing equity holders' position.