Don't forget CAPX and working capital. With a 20% revenue growth for 2006, and giving the benefit of the doubt on their cost-cutting program (I give them 15% cost reduction on the 25% headcount reduction. Flattering since most of their cost will be key personnel who they can't axe), I estimate they halve CAPX and working capital to 5m, and 10m respectively, and the free cash flow is still *negative* 7m.
Unless the business really turns the corner (substantial revenue growth next year), an equity financing/d4e swap is the *only* way this company can pay down its debt. If I was a bank, I would *not* regard this company as a going concern and would be itching to get a d4e swap/rights issue away ASAP as the pence in the pound on a debt default is worsening day by day since the shareholder meeting last week. I expect we will hear something from their bankers very soon indeed.
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