French office landlord Alpha Pyrenees has cancelled future dividends in a long overdue admission that its vast financial liabilities are a problem. Currency hedges signed in 2006 and 2007 were £23.8m in the red at the year-end - well over three times the current market value of the company. That liability will only have expanded with the weakness of sterling this year, and will now be approaching the £38.3m clocked in mid-2011, when a pound bought €1.11. The hedges expire this coming October, so the company needs cash quickly.
It has £8.4m of cash in the bank, £7.5m held as collateral against the hedge and one unmortgaged property in Nimes valued at £6.7m. Even if the company managed to sell this asset at book value in a hurry, the funds would not cover the current liability by some margin. Rental profits, which were just £2.2m last year, will only help marginally. With a current net loan-to-value (LTV) of 76 per cent, it will struggle to raise more money against its mortgaged properties.
We see little option for the company but a complete wind-up. The hedges are only its most pressing problem. Its debt packages expire in February 2015 and, given the elevated LTV, will be impossible to refinance at the current boom era interest rate of 5.26 per cent. Higher rates will wipe out the company's already slim profits.
ALPHA PYRENEES (ALPH) | ||||
|---|---|---|---|---|
| ORD PRICE: | 5.9p | MARKET VALUE: | £6.9m | |
| TOUCH: | 5.8-6p | 12-MONTHHIGH: | 29p | LOW: 5.9p |
| DIVIDEND YIELD: | 31% | TRADING PROP: | nil | |
| DISCOUNT TO NAV: | 66% | |||
| INVESTMENT PROP: | £249m | NET DEBT: | 926% | |
| Year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 55.5 | -64.1 | -54.4 | 6.60 |
| 2009 | 16.5 | -31.6 | -26.9 | 7.00 |
| 2010 | 17.1 | 5.80 | 4.90 | 3.60 |
| 2011 | 18.5 | 6.30 | 5.30 | 3.60 |
| 2012 | 17.5 | 7.30 | 2.20 | 1.80 |
| % change | -5 | +16 | -58 | -50 |
Ex-div: na Payment: na | ||||
