Current climate of debt ceiling reached, reduced testing expectations and need for debt waivers.
Scenario 1. They manage to gain waivers and achieve 2.5 mil profit. This would exceed current market expectation. If target P/E ratio is around 12, then market cap of 30mil would see a modest price bounce to 17-18pence per share.
Scenario 2. Best case scenario from most recent statement, waivers and 1 - 1.5 mil profit. Target P/E of 12, market cap range of 12 to 18mil, would mean share price range of 8p-12p per share. So a moderate to heavy decline from even these ranges.
Scenario 3. 1-1.5mil profit, but no waivers. At this point going concern status would be questioned and administration or at least suspension of shares from trading. Either way, the chances of current share holders retaining any value at all starts to completely disappear.
I can see Prepack administration saving the name, writing off all share holder value. This is the most likely outcome in my opinion, because I simply can't see the market being willing to finance a bail out. There is a profitable company somewhere here, but would require the administration to detach it from the rest!
I would expect a statement on waivers before results. The long silence after declaring borrowing was going to hit the limit is causing a lot of harm. I don't see equity raising as viable, market has already been stung by that one!
Even if they gain a waiver on borrowing. Even if they come in at 1m profit. I don't see how the company would retain a market capitalisation of even �30m. P/E of 30 with no scope for borrowing and declining sales means that almost whatever the results price has a lot further to fall.
Only way out is if underlying sales are seen to be rising in next results, alongside some waivers on debts. I doubt market will allow another fund raising after the last one, institutions won't come in for such a small market cap. Only fund raise will be a death spiral style.
Best case scenario now is a buy out, probably at a discount or nominal value due to debt and pension deficit, which will at least preserve jobs but not shareholder value.
It isn't rocket science. Price this week has risen sharply anticipating a stronger set of results. However, bookings to Spain are under pressure, which is the main holiday destination, margins are squeezed, and no return to dividend. These were all expected by a majority of analysts, so this is simply a correction to the previous trend, not in and of itself a negative reaction to the results.
In other words, so far this week some people have speculated on a better than expected set of results pushing up the price. However, the results were as expected so the price is correcting to the previous trend.