Released on this ‘getaway day’ (in the US), and surprisingly only covered by the local Yorkshire Post,
is the report of Tunstall Healthcare Group’s
year-end closing (30 Sept 2013) results. The short term news is positive: 21 percent revenue growth to £221 million in its 2013 statutory accounts. However, this adds in the acquisition of Spanish monitoring provider Televida for £27.4m in January 2013 and the 2012 purchases of AMAC in the US and STT Condigi in Sweden. The official posture of the company, expressed by CEO Paul Stobart, is that “with continuing Government austerity measures and a fragile global economy, the business does face challenges in the short term.” And one of those challenges making for a gloomy picture is debt service.
We’ll let the YP
speak: “The group, which is owned by private equity house Charterhouse Capital Partners (CCP)
paid £13.7m of interest in cash on its senior and mezzanine debt of £265m, as well as a total of £114.4m non-cash interest on long-dated shareholder loan notes and other loans. This results in a statutory reported loss for the group of £127.8m.” That change of nearly £350 million, which includes operating costs and other expenses, illustrates the critical consequences of debt service on the bottom line, indeed [TTA 22 May
]. Many thanks to one of our reliable sources for picking up this report.
New: Founder Steve reminds us of his related (and oh, so prescient) analysis from 2010 about Tunstall’s earnings versus debt service balancing act in Telecare Soapbox: Equity capital. A cautionary tale. (Thank you Steve for adding)
It is worth a detailed read because the 2009 numbers were also ‘challenging’. Steve dug through 2009 publicly filed (in UK) numbers to reach his conclusions. In sum, “The important question is whether their underlying position is sound and reliable, or whether they are shaky. They also tell me that the robustness of a company’s cashflow is the most important survival factor.” If I am reading the report on CompanyCheck correctly, the eye-watering negative net worth of the Group and the low cash positions of both the Group and UK are oddly reminiscent of airline financial statements when this Editor was still in that business. Do remember the object examples of Texas Air Corporation (once the world’s largest airline holding company), Pan Am and TWA! You also have to have some sympathy for the management which was not part of getting into this ‘pickle’ now tasked with getting the company out of the barrel.