Wednesday 24 January 2018 ShareProphets: The one stop source for breaking news, expert analysis, and podcasts on fast-moving AIM and LSE listed shares

LSE Asylum – the financial crisis is actually far worse than we previously indicated: where's the Fat Lady?

By Tom Winnifrith, The Sheriff of AIM | Friday 17 March 2017


A couple of days ago I noted how the London South East Bulletin Board ( aka the LSE Asylum) appeared to be heading towards insolvency - HERE. It is the fate which, almost, invariably happens to companies that hire Zak, the Sith Lord, Mir. For Judas is also Jonah. And now a closer examination of its historic numbers shows that the crisis may be far worse than even we thought. Timber!!!!!

For the 2014 year retained earnings increased by £164,581 after the deduction of a dividend of £200,000 (see note 5 to the accounts) paid in the year, implying post tax earnings for 2014 were £365,581.

For the 2015 year to May 31 retained earnings declined by £6,552 and no dividend was noted as having been paid implying a post-tax loss of the same amount. For 2016 retained earnings declined by £146,673 and no dividend was noted as having been paid implying a post-tax loss of the same amount. So there has been a dramatic decline in profitability from a profit of £365,581 to a loss of £146,673 in three years.

In addition to shrinking net assets, the quality of those remaining net assets is declining. In the 2016 accounts, LSE capitalised some £102,595 of costs into intangible assets. Intangible assets now represent almost half the net assets of LSE up from under 15% for the previous two years.

The intangible assets represents intellectual property rights and are amortised over a rather leisurely 10 year period. Given the loss for the year and the dramatic decline in profitability you wonder how they persuaded the auditor that no impairment was required.

Unless the current year has bucked this three year trend of rapid decline - and as I explained in bearcast yesterday here - there are very good reasons why this may not be the case, the Asylum is by now running on vapours.

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