Supplier of analogue and digital printing and graphics arts products Litho Supplies (AIM: LTS) has clarified the reasons behind its request to ask for a suspension in the trading of its shares, which took effect at 8 AM yesterday pending clarification of its financial position, lamenting difficult conditions in the printing industry that led to tighter credit terms from its suppliers.
Due to the deteriorating conditions over the past two years, many companies have gone out of business, leading to a fall in demand, which in its turn resulted in a pile of bad debts for Litho in both numbers and financial value as turnover declined 20% over the past 12 months.
The group said it has managed to achieve cost reductions, which put cash flow pressures on the business with redundancies and monies being paid in lieu of notice. The cash flow was further negatively affected by the reduction of credit terms by its suppliers in view of the withdrawal of major credit insurers from the sector. The sale of capital equipment to improve the cash balance has also been problematic as obtaining credit facilities for potential buyers has been just as challenging for the aforementioned reasons, the company said in the statement.
While Litho said that there were “green shoots” appearing in Q3, the increasing level of interest fell short of matching expectations, though it appeared that the results for the second half of the year would be better than for the previous half.
The group incurred further bad debts in November as credit terms from some of its suppliers were further tightened, premeditating the company’s decision to ask for a suspension in the trading of its shares.
Shares in the company have declined from nearly 9 pence in August to the current price of 5 pence per share.
The company has held discussions with HMRC regarding an arrangement to pay VAT arrears over an extended period, yet no payment arrangement has been agreed.