Good morning! Well I hope you had a better long weekend than me. I was visiting friends in London, and came down with a chest infection, so have been an (over-staying) "boring & miserable" house guest, requiring 20 hours per day sleep! I'll need to head back to Hove at some point today before I put down roots on their sofa!
It's quiet for news today thankfully, so here goes:
Interbulk (LON:INB)
Shares in this bulk materials logistics company have been poor performers in the last year. I've mentioned it three times in the last year, each time pointing out that it has a terrible Balance Sheet, with far too much debt, and heavily negative net tangible assets.
Other unattractive features are that it only generates a wafer thin profit margin, most of which is consumed by interest payments. There are no dividends, and it's hard to see any likelihood of dividends being paid in the future, unless the Balance Sheet is restructured with an equity fundraising.
So is the equity actually worth anything? In the absence of a strong trading recovery, I would say arguably not.
There's another profit warning this morning, saying that H1 (6m to 31 Mar 2014) will deliver lower operating profit than the equivalent period last year, partly mitigated by lower interest cost. Although on the full year outlook they say;
The Board expects that the Group will have a stronger operating profit performance in the second half helped by the internal cost saving measures implemented over the last few months, including reductions in fixed costs, operational efficiency measures and specific procurement initiatives. This, along with stable interest expense, means the Board expects the full year profit before tax to be broadly in line with expectations.
Note that they said the same thing about H2 outlook last year, but then delivered not very good full year figures.
I don't think this can be taken seriously as an investment with a Balance Sheet this stretched. It never ceases to amaze me how lenient the Banks are being right now. In any previous Recession companies with such stretched Balance Sheets would have been put into Receivership/Administration without a qualm. Whereas now they seem to be allowed to soldier on indefinitely. There will be a day of reckoning though,…
