Good morning!



Wincanton (LON:WIN)

This is a logistics group (e.g. transport & warehousing) with one of the worst Balance Sheets you are likely to ever see. It amazes me that the auditors (KPMG) are happy to sign off their accounts, when the company's financial position is so bad.

Not only is there a £101.9m deficit on net current assets (being £254.9m current assets, less £356.8m current liabilities) shown in the last Annual Report (as at 31 Mar 2013), but there is an additional £405m of long term creditors! (being £196.9m debt, £148.7m pension fund deficit, and £59.4m in other provisions).

So strip out intangibles, and net tangible assets were negative to the tune of £400.9m! That's beyond bad, it's off the scale horrendous. Therefore this share is completely uninvestable at any price in my opinion. It's frightening how many investors are completely ignoring financial strength at the moment, cheerfully ignoring massive liabilities in this case, and just valuing the business on its PER.

The trouble with that, is that in all likelihood this business will need all the cashflow it generates for the foreseeable future to service & reduce debt, and the pension fund. Dividends stopped in 2011, and it would be reckless for them to re-start. Therefore the way I look at things, these shares are worth nothing.

Anyway, not that it really matters, but the company reports today that it is trading in line with market expectations.





Redhall (LON:RHL)

I went through the accounts of Redhall in detail about a month ago, and came to the conclusion that it was very high risk - with far too much debt, and operating in a low margin, difficult sector - similar activities to Silverdell, whose bank unexpectedly pulled the plug on them last year for reasons that are still unknown. In that case the CEO & a vulture company hived off the decent parts of the business, leaving shareholders with nothing, which most people agree was a total disgrace.

Redhall's financial position actually looks to me worse than Silverdell, with more debt, so they are completely reliant on the ongoing support of the Bank - who have extended facilities to Sep 2015, but do I really want to invest in any situation…

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