By Steve Moore | Friday 17 November 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.
I first warned on shares in Nature Group (NGR) on this website at 11p in 2014 HERE and further since – most recently in June of this year; without additional material contracts in the short term, it’s cash crunch ahoy! The shares have recently been around 3p, but are currently soaring on the back of a “Strategic Partner & sale of interest in US” announcement…
This is of an alliance with India hazardous waste management services market leader Ramky Group, including Ramky to acquire a 50% interest in Nature’s business operating maritime waste treatment facilities along the Texas Gulf Coast (Nature Environmental & Marine Services LLP) for an initial $1.6 million. Nature notes this business made a pre-tax loss of £0.132 million on revenue of just over £3 million in 2016 and that net proceeds…
…“will be utilised for the company's immediate working capital requirements and, importantly, will significantly benefit Nature Group's current cash position which, as previously announced, has been adversely impacted by a number of factors, most notably the continued performance of its Oil & Gas division in the current challenging but improving oil price environment. Furthermore, the net proceeds will allow the board to implement a number of initiatives identified as part of a detailed strategic review over recent months and to implement a turnaround plan.”
Hmmm, will they? Nature Group’s results for the first half of 2017 showed a continuing operations loss of £1.8 million, net debt of £1.9 million and net current liabilities of £3 million – the latter also with the stated current assets of £6.9 million including just £0.4 million of cash. There was also £0.8 million of non-current liabilities and £9 million of non-current tangible assets - £8.2 million of those “plant, vessels and equipment”. The liquidity crunch was further emphasised by last month a €0.1 million loan being made to the company by CEO Andreas Drenthen “to provide short term liquidity”.
Thus, the above balance sheet context suggests even the noted disposal proceeds far from transformational – and there’s worse. This is with the transaction also seeing Nature provide a $0.8 million loan to Nature Environmental & Marine Services, that “up to US$0.45 million may have to be paid back by the group or further interests in NEMS transferred by the group to Ramky (at the group's election), if certain financial performance targets are not achieved by NEMS in 2018 and 2019” and the CEO loan having been repaid.
The announcement also includes “Ramky has expressed a firm interest in working alongside Nature Group to develop port reception facilities in Indian ports” and that the board believes the ongoing relationship with Ramky represents “a significant opportunity to expand Nature Group's operations in the US and internationally”. However, currently the liquidity situation clearly remains tight – “in addition, Ramky International (Singapore) Pte ltd, part of the Ramky Group has made available to Nature Group a loan of US$0.2 million” – and I continue to avoid.
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