Skipton's Wynyard stake subject to heavy writedown, change in accounting treatment in recent filing

Thursday 20th October 2016

Wynyard Group's major shareholder and the potential source of vital working capital, Skipton Building Society, wrote down the value of its investment in the company and changed its accounting treatment of the shares because it felt it no longer exercised significant influence over the business.

The British building society valued its stake in Wynyard in the six months to the end of June 2016 at just 400,000 pounds. It reported a profit before tax of 76.8 million pounds in the same period, suggesting Wynyard's future will have little material impact on its operations.

As of the balance date for Skipton's accounts, Wynyard's shares traded at 65 cents, with Skipton holding 17.7 percent of the stock. They've since fallen to 21.5 cents and have been in a trading halt since Monday.

The crime-fighting and intelligence software company today extended its trading halt until Tuesday as it seeks to tap a $10 million stand-by loan facility agreed with Skipton in August, saying it needs the funds so the business can operate normally.

The facility was agreed on Aug 10 and includes arrangement and commitment fees, drawdown fees of 8 percent, and an annual interest rate of 15 percent on any amount drawn down. Skipton imposed restrictions on the facility including a test that the board is confident that the company "can enter into transactions sufficient to repay any amount drawn down under the facility" and tied the funds to meeting certain financial covenants.

"Due to Wynyard’s current working capital position, the company will need to make an initial partial draw down on this facility in early November," it said today. "Certain conditions must be met in order to draw down on this facility. The board is investigating a number of strategic options so that Wynyard can meet these conditions".

In Skipton's half-year accounts published in July, the society says that it's share of Wynyard's losses for this period was GBP2.4 million, compared to GBP0.9 million in the year before.

It also set aside an impairment charge of GBP1.1 million to reflect the deterioration of the share price.

The departure of Skipton Investment's Richard Twigg from the board of Wynyard on June 20 meant Skipton decided it no longer held significant influence over Wynyard. The accounting treatment of the shares was changed from an associate investment to an equity share investment, with gains and losses reflected in its available-for-sale reserve. This change meant another loss of GBP0.9 million was recognised.

BusinessDesk.co.nz

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