Wednesday, 17 June 2015
Bertrams Nursery Group are using Crowdcube to raise a mini bond for £1,000,000 at 8%. The term is fixed at 4 years and interest paid monthly. There is no security and no secondary market.
An article in the Telegraph by one of their 'experts' states that -
''Net profits are about 10pc and earnings before tax and other costs ("Ebitda") are 25pc of turnover.
On this basis, the cash generated by the business in coming years should cover the interest costs of this bond issuance and meet obligations to other lenders, the biggest of which is Santander.''
It doesnt take long to check out the real accounts for Bertrams and to discover that these 'facts' published in what you might expect to be a credible paper, are nonsense. Out of the last 5 years of filed accounts, the company reported losses in 4 of them in the pre tax line. In the 4 years of losses, all of them showed an operating profit unable to cover interest payments.
So given a 4 year window in which income has to cover current liabilities and then some if the mini bond completes, you would have to be one hell of gambler to take this on. At 8% it looks as mad as most of Crowdcube's equity valuations.