Regarding London Biscuits Borrowings

Given the fact that I had already made two blog postings on London Biscuits, I felt no motivation to make another posting until I saw the following coverage on the Edge Financial Daily: Did London Biscuits sell the wrong ‘egg’?

Yes, until I saw the following statement in that article.

• The company currently sits on a cash pile of RM15.61 million. Its borrowings, which consists of term loans, bank overdraft, and banker’s acceptances and revolving credit, stand at RM176.35 million

Borrowings only at 176.35 million?

Now because I had clearly stated otherwise, I felt it was only right that I make this posting.

Here's my SOURCE of data.

London Biscuits' May 2010 earnings: Quarterly rpt on consolidated results for the financial period ended 31/3/2010. The attached pdf file.

How much was the total borrowings as stated in London Biscuit own quarterly earnings notes?

Why is the Edge Financial Daily stating otherwise?

And regarding that whole eggs issue.

I find it amusing that the most sensible issue was not asked.

Why is London Biscuits making such 'investments' in the first place? Can it afford it? Yes, does London Biscuits have the cash to make such investments?

(let's forget that most of the stuff that was mentioned on the Edge Financial Daily article could be found in my blog posting: Review Of London Biscuit )

When did London Biscuit 'invested' in Lay Hong?

According to the Edge Financial Daily:

• The layer cake producer had originally invested RM12.08 million in Lay Hong since 2006.

As stated in my blog posting, London Biscuits announced its initial investment in Lay Hong on 16th November 2006. ( see announcement on Bursa website here )

Now to answer my question on whether London Biscuits can afford this investment, it's best we refer to the most recent fiscal year earnings report, yes?

On 1st Sep 2006: Quarterly rpt on consolidated results for the financial period ended 30/6/2006. The document attached in that earnings report provides the clear answer.

How much cash did London Biscuit had? 17.266 million. Total Loans 108.557 million.

With that balance sheet, did London Biscuit have the money to 'invest' in Lay Hong in 2006??? Could it sensibly afford that 'investment'?

The next fiscal year: Aug 2007: Quarterly rpt on consolidated results for the financial period ended 30/6/2007. Yes, a year later, London Biscuits loans soared to 140 million. Cash declined to 16.422 million.

How? Won't you say that London Biscuit essentially 'borrowed' to make such an investment? Was it sensible to make such an 'investment' when London Biscuit wasn't even financially strong?

Now London Biscuit disposed at a loss. It said it needed to boost its cash balances.

Think about this hor.

And what about the other investment like Khee San?

Isn't that 'investment' more incredible?

And like Lay Hong's case, was London Biscuits sitting on a huge pile of cash that the management deemed it as wise and prudent to invest in Khee San?

The Edge Financial Daily did report this poor investment.

• In Sept 2007, London Biscuits acquired 18.420 million shares, or a 30.7% stake in Khee San Bhd for RM27.630 million, or RM1.50 per share. Unlike Lay Hong and TPC Plus, which represented upstream diversification, the purchase of Khee San, a manufacturer of sweets, was meant to widen London Biscuits’ product range.
  
  However, the Khee San purchase has not turned out well financially. Khee San’s shares last traded at 56.5 sen, or 62.3% below London Biscuits’ cost three years ago.
  
  Khee San’s earnings have also not been particularly exciting. The company earned net profit of RM1.39 million, or 2.32 sen per share, on revenue of RM51.93 million for the nine months to March 31, 2010.
  
  For the financial years ended June 2008 and 2009, Khee San’s net profit was in the range of just RM1.6-1.7 million. In FY2007, it posted a net loss of RM0.88 million.

That purchase was reflected in its earnings notes on Aug 2008: Quarterly rpt on consolidated results for the financial period ended 30/6/2008. And the most important fact from that earnings report is that London Biscuits loans increased to 190 million.

Let me repeat my questions again..

• How? Won't you say that London Biscuit essentially 'borrowed' to make such an investment? Was it sensible to make such an 'investment' when London Biscuit wasn't even financially strong?

And this Khee San investment is now '62.3% below London Biscuits’ cost three years ago.'!!!