Non-regulated network Prest-bury Holdings has issued its second profit warning of the year, forcing it to raise £500,000 to bolster its balance sheet ahead of FSA regulation.
The Aim-listed company, which says it is preparing for a move towards FSA regulation for its mortgage and non-investment life businesses, raised the funds through a placing of £1m of convertible loan stock to Armadillo Investments.
Prestbury, which has pled-ged to steer clear of ventures which require up-front funding, attributes the profit warning to lower than expected sales from joint ventures with its Moneybrain division.
Analysts also blame the low recruitment of unregulated intermediaries for its Solution Network division although Prestbury – which claims it is a “natural home” for them – says numbers are rising steadily.
Chairman Francis Maude admits that Prestbury's half-year and full-year results will fall significantly short of market expectations but argues that revenue growth has red-uced its monthly cash burn significantly. With its costcutting efforts, Maude says that he expects cash burn to be eradicated within the next few months.
Maude says: “The steps we are making to cut costs, strengthen the balance sheet and recruit new network members mean that Prestbury remains well placed to be a winner in the new world.”
However, experts argue that Prestbury's method of raising funds has exposed the problems it is facing.
Master Adviser managing director Doug Brodie says: “It is an expensive way to raise money and is usually only done when the tradit-ional equity doors are not open to the company. It would appear that all the early concerns about Prestbury were right.”
Durlacher analyst David Pannell says: “Neither of the two key components of Prest-bury's business plan has worked as we expected.”