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Belluscura expects cashflow breakeven by Q1 2025 as production moves to China

09:46, 2nd April 2024
Paul Hill
PMH Capital

Despite forecast central bank interest rate cuts from the summer onwards, it's still incredibly tough for small businesses to access fresh capital.

To me, this is largely a function of liquidity, where investors have jumped on the AI, GPL-1 anti-obesity drug, and megacap bandwagons, whilst equally exiting from the smallcap sector.

This process will inevitably reverse at some point. But in the meantime, it has led to numerous frustrations. Not least, delaying the commercialisation of Belluscura's next-generation, portable oxygen concentrators (POCs).

Indeed, in this morning's trading update, BELL said that after suffering an extra 4 months in closing its £5.8m all-stock purchase of TMT Acquisition (£4.7m cash shell) at 21p.

The company was now expecting to become self-financing in Q1'25 vs H2'24 before. Here adjusted EBITDA should turn positive from Q3'24 onwards, with FY24 "revenue and EBITDA coming in between $16m-$19m and -$0.75m to -$1.5m" respectively. This compares to previous estimates from house broker Shore Capital Markets of $22.5m and +£1.5m.

In terms of funding, available cash balances were $3m at the end of March, with the Board currently in discussions with 3rd parties to provide "a line of credit" (ie debt finance) to cover one-off engineering, quality control and regulatory expenses for both the US and China, alongside providing startup inventory for the new DISCOV-R device.

As such, soft-launch of the DISCOV-R has been pushed back until the end of June vs March previously. Full commercial launch should now commence in September, with Chinese manufacturing partner Innomax assembling the vast majority of the POCs, and delivering a 40% reduction in the unit cost vs the US.

Finally, audited 2023 accounts are due out in June - allowing the auditors to quantify some one-off fair value adjustments relating to inventory (FGs & RMs), RM supply agreements and warranty provisions.

Exact financing sums weren't mentioned in today's RNS, albeit I hope to catch up with management later this week.

More positively, demand continues to be strong for Belluscura's leading POCs, especially across North America and Asia. In particular, China is the world's largest COPD market with almost 100m sufferers.

CEO Bob Rauker commenting: "It is disappointing that cashflow breakeven has been delayed to Q1’25. However, the actions we have taken to manufacture the great majority of our products through Innomax in China will result in significant savings in the cost of goods, resulting in a material improvement to gross profit."

"We have substantial interest in the DISCOV-R, as demonstrated by the demand and orders we have already taken from leading oxygen providers. We are focused on bringing this new product to initial launch as quickly and efficiently as possible within the next three months."


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