Poor cash conversion26 Jul 2016 10:22
Having research SGI http://www.stockopedia.com/content/10-signs-of-trouble-at-rare-antiques-dealer-stanley-gibbons-108738/, the one thing that should worry shareholders is cash in the bank. Here's why:
The company�s cash cycle historical average is 300-400 days. Now, it averages 700 days.
That increase meant the company needed to borrow money to meet its working capital.
A look at the change in cash cycle days should tell you about its short-term liquidity constraints.
In 2012, its cash cycle was 375 days with daily expenses of �82.8k. Therefore, working capital required is �31.05m.
By 2014, working capital required has increased to �69.72m, and a year later its �101.47m.
The working capital increase in 2014 was �38m, but the company raised �39m in equity to pay for its acquisitions, and that has �offset� the increase in debt.
The working capital increase in 2015 from 2014 was �31.75m, this was funded by all the cash in the bank, along with a �2.5m overdraft, so a total of �12m.
The company borrowed an extra �9.2m, along with the increase in liabilities coming from pensions, tax and other payables amounting to �4.9m, along with the sale of �4.4m of a freehold property, a total of �30.5m.
So, the result coming out for March 2016, will there be a further increase in cash cycle days?