Felled Cedar seeks rescue from insolvency threat

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The future of Cedar hung in the balance over the New Year period with confirmation that rescue talks to save the applications software house from insolvency were underway with three potential bidders. These are said to range from venture capital to trade acquirers.

But the value of the bids is reflective of the decline in Cedar’s fortunes. In March 2000, the company had a capitalisation of £964.4 million. It’s believed that one of the bids on the table puts the current valuation as low as £3.5 million.

Cedar enjoyed a period of fast expansion in 2000, acquiring US firm Enterprise Solutions for £50 million, which doubled its workforce over night. But at the end of December 2001, the group reported a £53.7m pre-tax loss, on sales of £ 50.8m.

It was the climax of a troubled few months. In September, Cedar issued a profits warning that slashed 93 per cent off the value of its shares in 48 hours. It has already cut about 370 jobs and plans to reduce its headcount by a further 80 to 1,030.

With net debts of £38.3 million and an overdraft repayable on demand the company admits it does not have "sufficient working capital for its present requirements" and is dependent on the continued good will of its bankers.

Managing director Mike Harrison continues to believe that the company will recover, citing multiple factors as reasons for the current problems, including £10m of lost business due to customers running into financial difficulties and a further £9m of deferred orders. But he said the co mpany had an order book of £56.2m, which should be recognised over the next 18 months.


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