RE: Debenhans 4th most visted apparel website in UK now. (Nov was 8th, october was 11th).18 Jan 2026 16:03
I wouldn't count to much on this adjusted ebitda lad... Adjusted ebitda isn't really worth the words coming out of Dans mouth.
A company can fall into administration even when its adjusted EBITDA is positive. While a positive adjusted EBITDA indicates that the core business operations are generating profit on paper, it does not guarantee that the company is generating sufficient cash flow to meet its immediate financial obligations.
Administration is a cash-flow insolvency issue, whereas EBITDA is a profitability metric.
Why Positive Adjusted EBITDA Does Not Prevent Administration
EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) is often used to measure operational performance, but it ignores several critical factors that can cause a company to fail:
Cash Flow Shortfalls: A company can be profitable on paper but have no cash in the bank to pay creditors, salaries, or tax debts.
High Debt Servicing (Interest): Adjusted EBITDA adds back interest expenses, which masks the burden of debt repayments. If interest payments exceed operating cash flow, the company may fail.
Capital Expenditure (CapEx): EBITDA ignores the cash spent on maintaining or upgrading machinery, property, or equipment. In asset-heavy industries, these costs can be substantial, making a "positive EBITDA" company cash-negative.
Working Capital Requirements: A growing company might have high sales (positive EBITDA) but burn through cash by financing inventory or waiting for customers to pay invoices.
Aggressive Adjustments: "Adjusted" EBITDA often adds back non-recurring costs. If these "one-time" costs become recurring, or if the adjustments are too aggressive, the true financial picture is much weaker than reported.
Common Reasons for Insolvency with Positive EBITDA
Refinancing Failure: A company may be able to pay interest but cannot repay a large balloon payment of debt principal when it matures.
Creditor Pressure: If creditors (like HMRC or suppliers) are not paid on time, they can petition to wind up the company, forcing it into insolvency regardless of its EBITDA.
Sudden Cash Shock: A loss of a major customer, rapid increase in raw material costs, or litigation costs can drain cash reserves, despite a healthy operational EBITDA.
In summary, EBITDA is not a substitute for cash flow. A company with positive adjusted EBITDA is only safe if that profit successfully converts into cash to pay its debts.
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