CleanSpace Holding (ASX: CSX) is a small Australian company that specialises in making special masks that filter out contaminants like fumes, dust, and viruses. Their powered air purifying respirators provide breath-responsive airflow and are designed for prolonged use, with a single battery charge sufficient to last through a 12-hour shift. As you can imagine, the advent of covid-19 caused a sharp but temporary spike in demand.
On the H1 FY 2026 results call, current Chairman Graham McLean, who joined the board in February 2022 when the share price was over $1, said:
“…the company listed in 2020 at the height of the pandemic. And at that point, the company was very focused on selling into the medical sector, obviously, to support hospitals during the pandemic. As the pandemic subsided, sales really did decline rapidly. And within 18 months or so, the company was actually on life support itself. We were making huge losses and lots of cash outflow.
So really, what we’ve tried to do over the last 3 to 4 years is firstly save the company because we were in danger of going out of business with no cash. And then secondly, reorient the company back to our original roots, which is in the industrial sectors…”
You can see how this translated to an initial two halves of revenue growth and profitability, followed by more than four years of unprofitability.
Unfortunately, even the current profitability is a mirage, arising from a paper gain of $2.8 million, arising as a result of the extinguishing of a liability owed to the NSW Health Administration Corporation on account of the failure of a joint project. Without this $2.8m boost, Cleanspace would have made a loss of around $1m in H1 FY 2026.
However, I do think it is a positive that the Chairman spent around $50k buying shares recently, including a portion on-market at over 50c per share.
There are also good reasons to think the company can achieve profitability in FY 2027, since price increases are taking effect in H2 FY 2026. First half cashflow is typically weaker, but the company is promising “Positive operating EBITDA for H2FY26” and “Cash Flow positive for full year”. If this modest positive momentum continues into FY 2027, it would be possible to see a small statutory profit over the year, maybe around a couple of million in a positive scenario.
At the current share price of about 45 cents per share, Cleanspace (ASX: CSX) has a market capitalisation of about $36 million, so the market is, in my view rightly, skeptical about whether the business will ever prove particularly profitable. Cash, including term deposits, decreased from $10.5 million to $9.8m in the six months to December 2025, and the company has no debt.
We can be sure that in reality, Cleanpace profits will always be a bit up and down, given the operating leverage in the business model, and the company will still need working capital, even if and when it no longer needs a cash kitty to fund ongoing losses. Therefore, even though the balance sheet looks reasonable, I’m not particularly inclined to give the company full credit for their cash, when I consider valuation.
If, allowing for minimum working capital, we accepted the enterprise value was around $30m, even then that would be around 15x the hypothetical profit in my positive scenario imagined above.
I do think Cleanspace is heading in the right direction as a business, and I could imagine that business justifying a higher share price in the future. However, the company still has much to achieve in terms of proving it can sustainably make a profit, and prior to that stage, the risks are fairly high. On the other side of the ledger, I’m not convinced that this business is particularly high quality, profitable or not, so I think that the share price upside may well be quite modest, even when it does make a modest profit, as I suspect it will.
Overall, I think Cleanspace is definitely improving as a business, but in light of its lack of sustainable profitability, I do not find the stock compelling at current prices. I would be more likely to be interested once it achieves at least one fiscal half of sustainable statutory profits.
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Disclosure: The author does not own shares in CSX and will not trade CSX shares for 2 days following this article. This article is not intended to form the sole basis of an investment decision. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
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