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Porta Communications – announces completion of new banking facility, how’s the balance sheet then?

By Steve Moore | Monday 12 June 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

On the back of a “Financial Completion of New Banking Facility” announcement, shares in PR and marketing group Porta Communications (PTCM) are currently more than 6% lower, sliding back below 4p. Hmmm.

The announcement is that a revolving credit facility with Clydesdale Bank has been formally implemented. This is a five year, £3.3 million facility “as part of the strategy to further strengthen the balance sheet”. Better take a look at that balance sheet then…

Wow, the one last published (as at 31st December 2016) certainly looks like it could do with being strengthened – it showing net current liabilities of £4.9 million, net debt of £7.7 million and ex-intangibles net liabilities of £6.9 million.

More concerningly, despite just a £0.7 million investing activities outflow, the respective figures represented £1.4 million, £1.4 million and £1.5 million increases in the year.

The company argued earnings impacted by “significant senior hires made throughout the year and these strategic appointments are now having a positive impact on the business” and that “2017 has started well and from this month we have a new management team in place with a new and collaborative culture that is committed to taking Porta to the next level”.

I’d suggest though it currently has far from a good financial base for that and also needs to prove that net cash can actually be generated here. At this juncture, one I’ll certainly be avoiding.

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