Auditor raises doubts over ailing Pembury’s survival
Directors of schools and retirement village owner Pembury Lifestyle Group say the struggling company has enough cash to survive for another year. Its auditors are concerned its weak financial position has put its future in doubt.
On Thursday the group released its delayed financial results for the year to December with a net loss of R40.7m.
Its current liabilities of R57.2m exceeded its current assets of R5.3m, said its auditor, Moore Stephens FRRS.
Moore Stephens said “a material uncertainty exists that may cast significant doubt on the group and company’s ability to continue as a going concern”.
“These matters further indicate that the group and company might be unable to realise their assets and discharge their liabilities in the normal course of business,” it said.
But Pembury said its cash position was improving and the company was getting better at managing its creditors. Its current liabilities included the prepayment of school fees, which was worth R9.8m, and provisions of R11.6m.
After its year end, trade creditors had been reduced by more than 30%. Cash generated by operations was R17.8m and the group had R1.6m in cash at the end of December.
CEO Andrew McLachlan said Pembury experienced a difficult year, but continued growth in pupil numbers and the relocation of Sandton residents would help its PLG Schools business.
The retirement villages business was enjoying high occupancies but limited growth prospects. As a result, Pembury would consider selling the business in the near future.
Independent analyst Anthony Clark said Pembury had disappointed since it listed at the beginning of 2017 and its tendency to release results months late had not helped its cause.
Neither had bad corporate governance. “It’s not often that a company consistently flights corporate governance, but Pembury, since its contentious listing jumping on the schools listing bandwagon of a few years ago, has proven to be remarkably adept at putting its own foot in its mouth and deceiving investors with misleading financial statements and or delays in its own results,” he said.
Poor management had seen its share price drop from R1 at listing to being a penny stock.
Clark had supported the stock at listing and believed that the very affordable schools and retirement villages businesses had growth potential, but the company had been very poorly managed.
“We have seen how PSG group invested successfully in Curro Holdings which runs a schools business and the Evergreen retirement villages business.
“PSG has good corporate governance, excellent management and access to the significant pool of capital to roll out developments. These are things Pembury doesn’t have,” he said.
Clark said Pembury might get a rescuer but the company would need to convince the investor that it could succeed with new management.
Previously the Black Management Forum backed Pembury and lost much of its investment, he said.