Eatonfield Group is confident that it can ride out the downturn in the property market.
Chief executive Rob Lloyd has loaned the business £750,000 and guaranteed borrowings of £1m. Since the end of June 2008 Eatonfield has generated £3.5m from disposals, which has helped cut debt by £2.5m. Net debt was £32.1m at the end of June 2008.
Lloyd’s loan and the company’s overdraft facility last until September 2008.
Lloyd says that two developments are due to be completed by December and he believes that £1.1m will be generated by these before the end of 2008. That would cut debt by a further £900,000.
There are also a few houses left to be sold. Eatonfield has already scaled back its housebuilding activities. It has planning permission for 530 plots and a further 1,287 potential plots which going through the planning process. These could be sold to raise cash.
Unsurprisingly, Eatonfield has passed its dividend in order to conserve cash. Overheads have been cut by 25% in order to reduce the cash outflow.
There could be further upgrades in values on the former Corus site acquired in November 2007 and a former NHS site in Glasgow acquired in March 2008. These are both on course to gain outline planning permission and change of use respectively. Lloyd says that it will be easier to borrow money when that happens.
The Corus site is valued at around £16m and is around 25% geared. If it does obtain planning permission early in 2009 then there would be scope to increase the gearing of this investment.
Planning permission also makes the developments more saleable. Lloyd hopes that Eatongate will have planning permission on four assets early next year.
All this depends on the state of the property market early in 2009. If it at least stops declining then this should help Eatongate. Selling one of the major developments would transform the balance sheet.
Finance director Howard Jones is leaving for a new job.
Eatonfield shares rose 0.5p to 3.5p each, which values the company at £810,000. The net asset value of the business is £16.7m. The large discount reflects the uncertainty. Progress with disposals will help to reduce the uncertainty.
Eatonfield joined Aim almost exactly two years ago and at that time it raised £10m at 125p a share.
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