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Entu – further from bad (en)tu worse; Strategic Review, new financing needed

By Steve Moore | Thursday 6 July 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.

Last month saw a delayed profit warning from energy efficient-home improvement group Entu (ENTU) – and me particularly noting the net debt and that, although purportedly “strengthened”, the executive team still not seemingly having the answers themselves – ‘from bad (en)tu worse, issues “more complex and extend further” than expected’. There is now a “Strategic Review” announcement. Hmmm…

This updates that such a review currently “is being undertaken to ensure the action plan, as announced in the trading update on 14 June 2017, is delivered efficiently and in a suitable timescale”. However, it is then added;

“As part of the strategic review, the directors are exploring options for new long term financing, and to strengthen the balance sheet, in order to support the group's action plan. KPMG have been engaged to assist with this process which, alongside debt or debt and equity refinancing, will include establishing interest in certain parts of the group.”

I.e. a combination of losses and net debt means new financing is needed. Not the best of negotiating positions for disposals and new debt and/or equity – and the shares have reacted accordingly, currently down a further more than 20% at circa 12p.

However, with in the near term it looking at best onerous debt, with possible discounted disposals and discounted equity issuance, on this disastrous October 2014, 100p per share, IPO, my view remains bargepole ahoy. Sell.

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