Aran R&D: How Much of 2025 Cash Was Truly Operating, and How Much Came From Working Capital and Upstream
Aran ended 2025 with NIS 53.8 million of cash, but only NIS 16.1 million of its NIS 58.2 million operating cash flow came from profit and pre-working-capital adjustments. The rest leaned on suppliers, customer advances, and a roughly NIS 14.5 million net-of-tax inflow from the Upstream milestone.
The main article already established that Aran's 2025 looked stronger in revenue than in earnings quality. This follow-up isolates a different layer: cash quality. By year-end Aran held NIS 53.8 million of cash and cash equivalents, versus NIS 20.3 million a year earlier. At first glance that looks like a sharp operating breakthrough. In practice, only a modest part of that increase came from the operating engine before working capital. The rest came from an aggressive working-capital release, mainly through suppliers and customer advances, plus an unusually large inflow from Upstream.
The clean way to read 2025 is through two bridges. In the operating-cash-flow bridge, the company reported NIS 58.2 million of cash from operating activities. But inside that number, NIS 42.1 million came from working-capital movements, while only NIS 16.1 million came from net income and pre-working-capital adjustments. In the all-in cash bridge, another NIS 13.6 million came from investing cash flow, driven mainly by the Upstream milestone payment, while NIS 38.2 million went out through financing cash flow. That is how cash increased by NIS 33.6 million. The cash is real. Its quality is mixed.
| Bridge | 2025 | What it really means |
|---|---|---|
| Reported operating cash flow | NIS 58.2 million | The full accounting operating-cash-flow number after working-capital changes |
| Cash before working capital | NIS 16.1 million | The cleaner anchor for operating cash generation before balance-sheet support |
| Working-capital release | NIS 42.1 million | The layer that lifted reported operating cash flow above the operating base |
| Suppliers and payables, including customer advances | NIS 29.7 million | More than half of reported operating cash flow came from two balance-sheet lines |
| Investing cash flow, mainly Upstream | NIS 13.6 million | Real cash, but outside operating activity |
| Financing cash flow | NIS 38.2 million outflow | Dividends, buyback, leases, and debt repayment |
First Bridge: Out Of NIS 58.2 Million Of Operating Cash Flow, Only NIS 16.1 Million Came Before Working Capital
Aran's 2025 net profit was NIS 25.3 million. But that is still not the right number if the question is how much cash the business produced before balance-sheet support. In the cash-flow statement, non-cash and non-operating adjustments reduced that by NIS 9.2 million, mainly because the NIS 16 million Upstream gain was reversed out while depreciation and amortization of NIS 7.8 million were added back. What remains is only NIS 16.1 million. Only after that do working-capital movements enter and add another NIS 42.1 million, lifting reported operating cash flow to NIS 58.2 million.
In other words, 72.3% of 2025 operating cash flow came from working-capital movements, while only 27.7% came from the operating base before working capital. That is not an argument that the cash flow is fake. It is an argument that its quality is mixed, so reported operating cash flow should not be treated as identical to recurring cash generation.
If the relevant lens is normalized / maintenance cash generation before growth CAPEX and before balance-sheet support, NIS 16.1 million is the more conservative anchor. NIS 58.2 million is the full reported operating-cash-flow figure. Treating them as the same thing would flatten the most important point in the year.
Where The Working-Capital Release Came From
This is the most important layer. The NIS 42.1 million working-capital release came from several places, but two lines carried the story: suppliers, and payables and accruals. Suppliers added NIS 17.6 million. Payables added another NIS 12.2 million. Together they contributed NIS 29.7 million, more than half of total reported operating cash flow.
Management describes the mechanism directly. In the directors' report, the company ties the rise in cash to strong positive cash flow from operations that was helped by improved credit terms with a major supplier in the equipment and raw-materials segment, and by customer advances in the same segment. That matches the notes. Trade payables and service-provider balances rose to NIS 28.6 million from NIS 16.9 million. Payables and accruals rose to NIS 39.9 million from NIS 25.4 million. Inside that line, deferred income and customer advances jumped to NIS 17.45 million from NIS 6.80 million.
The internal breakdown sharpens the quality issue further. Inside the increase in payables, NIS 10.6 million came from deferred income and customer advances. That means a very material part of the year's cash came in before revenue was fully delivered. Inside the increase in suppliers, the current maturities of long-term supplier balances also rose to NIS 2.713 million from NIS 0.546 million.
| Line item | 2024 | 2025 | Change |
|---|---|---|---|
| Trade payables and service providers | NIS 16.889 million | NIS 28.557 million | NIS 11.668 million |
| Deferred income and customer advances | NIS 6.804 million | NIS 17.451 million | NIS 10.647 million |
| Supplier credit inside the financing note | NIS 1.705 million | NIS 9.764 million | NIS 8.059 million |
| Current bank credit and current maturities | NIS 15.169 million | NIS 8.440 million | NIS (6.729) million |
The implication is straightforward. A large part of 2025 cash did not appear because the business suddenly stepped up to a much higher level of operating cash production. It appeared because payment terms moved in the company's favor. That can be perfectly legitimate in a growth year. It is simply not a source that automatically repeats every year.
Customer Financing: Part Of Reported Operating Cash Is Really A Financing Book Running Off
Another layer is customer financing. The directors' report explains that the drop in customers was driven mainly by continuing repayment of long-term customer debts from machine sales, even though the company also extended a new customer loan of about NIS 7.5 million during 2025. In the long-term customers note, the gross balance fell to NIS 18.3 million from NIS 25.1 million, and the non-current balance fell to NIS 8.5 million from NIS 9.5 million.
That matters because the company itself states in its accounting policy that customer credit is ancillary financing activity and not part of its core operating activity. That means part of the improvement in reported operating cash flow is not just normal commercial collection. It is also a financing book running off.
At the same time, the funding behind that customer-credit book changed shape. Total liabilities to banks and others fell to NIS 18.652 million from NIS 26.427 million, but inside that line supplier credit taken to finance customer loans jumped to NIS 9.764 million from NIS 1.705 million. So the balance sheet did become lighter in one sense, with less bank debt, but it benefited from more supplier-funded credit in another sense. That is not the same thing as clean free cash.
The connecting thread between the layers is clear: customers are repaying part of the older credit book, suppliers are funding a larger share of the new credit, and the spread between the two runs through reported operating cash flow. That is why both the customers line and the suppliers line belong to the same cash-quality story.
Upstream Helped The Cash Balance, But Outside Operating Activity
Alongside working capital, 2025 also benefited directly from Upstream. Investing cash flow included NIS 18.329 million of proceeds from the sale of rights and know-how, offset by NIS 3.809 million of taxes on that transaction. The net effect was NIS 13.583 million, which the directors' report frames as roughly NIS 14.5 million net of tax from the Upstream milestone.
Again, that is real cash. But it sits in investing cash flow, not in operating cash flow. Anyone looking only at the NIS 58.2 million operating-cash-flow figure misses half the picture, and anyone looking only at the NIS 53.8 million year-end cash number misses the other half. The rise in cash during 2025 was built from a combination of a limited operating base, working-capital release, and a meaningful investing inflow from Upstream.
Aran's all-in cash flexibility at year-end was also narrower than the headline suggests. Financing cash flow included NIS 14.0 million of dividends paid, NIS 5.4 million of share buybacks, NIS 14.9 million of loan repayment, and NIS 3.0 million of lease-liability repayment. In addition, the balance sheet still carried NIS 9.045 million of dividends payable at year-end, and that amount was paid in January 2026. So the NIS 53.8 million cash balance was high, but part of it was already earmarked.
What 2025 Did Prove, And What It Still Did Not
2025 did prove that Aran can generate cash at the balance-sheet level. It secured better supplier terms, pulled in more advances, benefited from customer-credit repayments, and received a large Upstream-related payment. Every one of those sources is real.
What 2025 still did not prove is that the business's recurring cash-generation power, without balance-sheet support and without another similar one-off inflow, had already moved anywhere close to NIS 58 million. The cleaner read is this: the operating base before working capital was NIS 16.1 million, more than half of operating cash flow leaned on suppliers and payables, and another NIS 13.6 million came from Upstream outside operating activity.
The immediate reports from late December 2025 and March 2026 add another NIS 29.9 million of defense orders that enter the delivery phase in 2026. The December order is scheduled over as much as 15 months starting in March 2026, while the March order is intended entirely for 2026 delivery. That means the next year may remain very busy. But those reports do not say that the same advance and credit terms will repeat with the same force. So 2026 will need to prove that at least part of 2025 cash was the start of a recurring engine, and not just an unusually strong year for working capital and Upstream.
Bottom line: Aran's 2025 cash build was real, but its quality was mixed. Roughly one-third of reported operating cash flow looked operating before working capital, most of the improvement was built through suppliers, advances, and customer-credit collections, and Upstream added another cash layer outside operating activity. So 2025 materially improved liquidity, but it still did not prove that Aran's cash-generation power was as clean as the year-end cash balance implies.
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