Last week can’t have been a very good one for Media Square’s embattled chief executive Peter Reid. Faced with the need to strengthen the group’s rather depressed balance sheet and to keep within bank lending limits, he had to report another loss, a prospectively challenging working capital requirement and an alleged conspiracy by Porta Communications to undermine some or all of the group.
Most off-putting of all was the statement by Reid that “the board is close to completing an updated detailed 12 month cash flow forecast to 30 November 2012 which will show the group’s position with regard to covenants and cash headroom over this future period and will be discussed with our bank when available”.
It seems most unlikely that Media Square has only just started forecasting its cash requirements for the year ahead. Most companies in its position would have been producing them at regular intervals and another “update” would be merely a matter of routine. Indeed some companies would have produced numerous iterations in the hope that at least one would provide comfort to the board and the bank.
So why even mention the fact? With net debt of £21.5 million at the end of September, either the company has adequate bank facilities to cover the ensuing months or it hasn’t. It’s hard to avoid the thought that the bank is taking a very close interest and has been considering whether the time has come to cut its losses and do a deal with a prospective buyer. Maybe Reid’s statement was intended to encourage potential investors to do just that.
With a stock market value of less than £300,000, ownership could be bought very cheaply. But no-one will readily want to assume ownership of a loss-making group with £21.5 million of bank debt too.
Bob Willott is editor of “Marketing Services Financial Intelligence”