it is the most aggressive and risky purchase within the portfolio and success or failure rests with the board and their ability to drive the business forward whilst maintaining the integrity of the balance sheet.
Considering that net debt is £70 million today’s announcement feels like robbing Peter to pay Paul but I suppose you have to start somewhere.
The St Ives Balance Sheet
Since the board have made a song and dance about ‘creating headroom against banking covenants’ it’s worth taking a quick look at the balance sheet to see just what the damage really is.
From the last half yearly report dated 7 March 2017 we can see:
- total assets of £320 million of which goodwill is £115 million and ‘other intangible assets’ £50 million.
- PPE is £30 million but this figure will be reduced going forward as part of the board’s strategy of selling off property to reduce net debt
- Current assets are woeful and consist mainly of trade receivables – £96 million, cash is held at £18 million
- Trade payable make up the vast majority of current liabilities at £86 million and ‘loans payable’ make up the vast majority of long term debt at £89 million
It is a precarious financial position and the strategy of selling off non core property assets will only last for so long – will the board also sell off the two business segments which have given them such a headache – books and marketing activation – all I know is that there is still much more to do.