Arden Partners – a big loss and a slide in NCAV

PUBLISHED: Feb 25 2016 @ 06:51 | Comments (0) |

Arden (LSE:ARDN) was purchased in September 2015 at 42.2p. The company had a market capitalisation of £8.1m and a net current asset value of £8.86m (April 2015 BS).

Since then it has reported an annual loss of £2.1m, and NCAV has fallen to £7.9m (October 2015 year-end).

So, is it a hold, sell or buy?

First, note that the share price has fallen to 29p – 33p so the market capitalisation, with 20.6m shares, is £5.97m – £6.80m.

Thus NCAV – see table – is above MCap, so it meets the quantitative requirement for purchase.

But it might struggle to satisfy the qualitative criteria of (a) reasonable business prospects, (b) able and high integrity managers, and (c) stability. These issues are all the more apposite after it reported a massive loss, following the downward trend of many years.

Before looking at the table you might like to familiarise yourself with the descriptions of the three business units, and causes of the unusual balance sheet entries in previous Newsletters (1st – 7th September 2015).

£’000s October yearend	2015	2014	2013	2012	2011	2010
Financial assets designated at fair value through P&L (mostly long market-making positions)	1,703	2,350	6,756	5,058	5,920	3,207
Available for sale financial assets	507	467	479	490	–	–
Sold security transactions awaiting settlement at yearend – Arden has not yet been paid cash for shares, etc. it has sold for clients	661	3,458	16,345	7,570	21,048	4,011
Other receivables	1,477	1,312	2,233	2,373	2,824	2,199
Stock borrowing collateral	120	102	1,098	107	–	–
Cash	5,372	8,282	3,733	4,882	5,201	9,014
Corp tax asset	16	8
Total current assets	9,856	15,979	30,644	20,480	34,993	18,431
Deduct ‘market payables’ – bought securities (for clients) awaiting settlement at yearend	-652	-3,492	-16,307	-7,379	-20,816	-4,106
Deduct all other liabilities	-1,419	-1,469	-2,764	-1,689	-2,553	-2,789
NCAV	7,785	11,018	11,573	11,412	11,624	11,536

Main observations from balance sheet:

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