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Oliver's Real Foods (ASX:OLI) - Founder & Executive Director, Jason Gunn
Founder & Executive Director, Jason Gunn
Sourced: Gold Coast Bulletin
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  • Organic fast-food company Oliver’s Real Food (OLI) had to stand down its entire workforce in March as COVID-19 sent the business into hibernation
  • The company said it was on the way to a strong quarterly financial result before the virus struck
  • Over the March quarter, however, Oliver’s burned $1.25 million
  • Given the shutdown only occurred in March, this suggests the company might have already been cash-flow-negative before COVID-19 spread
  • In other news, Oliver’s is still in discussions with British retailer EG Group about its potential takeover
  • Oliver’s shares are suspended today but last traded for four cents each

Shareholders of organic fast-food company Oliver’s Real Food (OLI) are getting nervous as COVID-19 ravages company operations.

Oliver’s said it was progressing towards a strong financial result for the quarter, but things turned sour after the coronavirus struck.

The company first felt the virus’ impact on its business in early March, but the brunt of the blow came on March 23 when the company had to stand down its entire workforce.

The company said effectively, the business went into hibernation — impacting overall trading results and cash flows.

However, the company’s quarterly cash flow report might be causing even more concern for shareholders.

Steady cash burn

Over the March 2020 quarter, Oliver’s burned roughly $1.25 million of cash.

Given operations only ceased in the last week of March, it seems the company might have already been on the way to negative quarterly cash flow before the virus spread.

Over the December quarter, Oliver’s made roughly $9.6 million in receipts from customers — going cash flow positive by $405,000.

Over the March quarter, Oliver’s made roughly $8.9 million from customer receipts. This is a marginal difference to the quarter before. Thus, it was the company’s production and operating costs which resulted in the cash burn — coming in $2.1 million higher over the March quarter than they did over the December quarter.

Of course, the company said it was feeling the effect of COVID-19 all through March. As such, perhaps the final month of the quarter truly would have been the catalyst for a strong result were it not for the coronavirus.

Nevertheless, with just $660,000 cash on hand at the end of March and no upcoming capital raising plans, Oliver’s has roughly half a quarter of cash runway left before its bank account is depleted.

Still, the company seemed confident in its cash flows, saying it expects businesses to track along as normal once COVID-19 travel restrictions are relaxed.

Moreover, with the business in full shut-down, it’s like quarterly spending will be drastically reduced while the virus rages on.

EG up in the air

Another key concern for investors is a potential collapsed takeover by British retailer EG Group.

In early March, EG launched an offer to take over all Oliver’s shares for 10 cents each.

However, some exceeded debt conditions — blamed on COVID-19 — meant the deal was in hot water in April with EG at risk of tearing up the contract. This was made more probable when EG declined to waive the debt condition from the purchase.

As of April 27, the two companies had five days to discuss an alternate takeover proposal or the deal will be called off.

Today, Oliver’s told shareholders discussions are in progress, but there is no further update just yet.

Oliver’s shares were suspended by the ASX today because the company failed to lodge its quarterly report in time. Shares last traded for four cents each in a $10.83 million market cap.

OLI by the numbers
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