The company behind a network of marinas across Wales said £35m it plans to raise from a new corporate bond will address cashflow issues.
Cardiff-based Marine & Property Group (MPG), whose interests include Cardiff, Burry Port, Aberystwyth and Port Dinorwc marinas, admitted that it had fallen behind on staff wages - although now only this month's salaries are due - after a planned investment in November was delayed. It said a new mid-market bond is expected to be finalised next month.
Director of MPG Chris Odling-Smee said wage backlogs had now been paid. He added: “We’ve got the next month now due, that is in the process of going through.
"We’re doing it by way of sweeps based on trading at the moment because of course we haven’t completed our capital deals. There’s still some which we are sweeping at the moment. Some salaries remain outstanding, but not the same ones that were reported on because they’re covered and it’s just the next period now.
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"So, we had some disruption in the last quarter of 2022. This relates to the fact that we’ve grown very, very quickly and it’s a capital intensive business. We had various deals which were due to complete in November, but they’re now going to complete around the end of this month.
"That delay is what has caused disruption with our cashflow. You can be trading really well and growing really well but cashflow is king. From our perspective it’s a lesson and a solemn message to make sure that we need to be six months ahead rather than two months ahead because if suddenly there is a delay as there has been here, you’re suddenly behind the curve."
He attributed part of the delay to caution in the business lending market.
"While we are able to get the deals that we wanted, it's taking longer to complete them because people are much more diligent. It’s that timeline which has been tougher for us to manage in the last 12 to 18 months, rather than can we get financing on the type of growth capital that we’re looking for," he said.
"Access to capital is more challenging than it has been perhaps previously because there’s a lot of caution out there. There’s a lot of pressure beginning to build and uncertainty as to construction costs versus return on capital employed. We’re quite insulated from that as we were able to demonstrate the returns and in very clear forecasts.
“Most of those forecasts are sort of contract based where we've got the contracts and we've got the occupancy and we've got a lot of commercial property as well. So you’ve got the steady elements of the business, but that does not mean that the thresholds that some of these lenders are now looking for is that much tougher to achieve.”
He added: “That's partly why we're putting in a mid-market bond because we see a lot of turmoil in the bank lending market over the next 24 months one way or the other. We’re putting in a mid-market corporate bond for two years which works as a sort of quasi-equity and leaves us in a very well financed position to progress our capital expenditure program in 2023.”
The bond will see £20m ringfenced for the Marine Group with £15m for the group's other businesses.
Asked if he was confident there would be no further cashflow issues and wage backlogs in future once the deal had completed, Mr Odling-Smee said: "Much more than that. It’s not going to be an issue. It’s then about the deployment of some of the capital and the construction works for projects and things we’re progressing on.”
The company also operates Watchet in Somerset. In terms of trading, the company sees a positive trajectory in terms of growth, occupancy and contracted work with revenue increasing by 25% each year which is expected to continue in its five year business plan.
“Trading wise, we’ve never had higher occupancy. We’ve never had more in the way of contract work which requires working capital to finance," said Mr Odling-Smee.
MPG operates its own dredging and harbour management services and the firm expects to double its usual volume of work in the next quarter although this will also pose some challenges. "We dredge our own harbours and also do a lot of third party contracts, which is an increasingly important part of our business," said Mr Odling-Smee.
"Over the next three months, we’ve got workloads which are not just a little bit above normal, they've more than doubled. That’s grown more than 100% compared with a year ago. Our challenge is recruiting and delivering on those contracts."
Recently, there has been frustration around the maintenance of Burry Port Harbour. Campaign group Friends of Burry Port Habour said the facility had deteriorated to an unworkable state with boats regularly stuck in the Carmarthenshire harbour because it was so poorly maintained by MPG.
The group has urged the local authority to enforce the long-term lease for Burry Port harbour it granted to MPG five years ago.
Commenting on the Friends of Burry Port Harbour petition, Mr Odling-Smee said: "Burry Port is a challenging harbour and has been loss-making for a long period of time. We are committed to completing the capital dredging works and have the capital agreed to deliver this. We will not waver from delivering this."
Asked how often it dredged the harbour and whether the water injection method was suitable he said water injection was the correct long-term strategy. He added: "However, we are happy to fund additional contracted works during 2023 to accelerate this and we are engaging with the council with this. We will during 2023 measure progress and we would like to engage with harbour users to steer the process and work transparently with them."
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