Loch Fyne Oysters in the red before cash injection

City Editor

Thursday 28 June 2012

LOCH Fyne Oysters plunged to a £1.6 million loss in its last financial year, ahead of a multimillion-pound injection by outside investors into the previously employee-owned company, documents obtained from Companies House reveal.

SHELLING OUT: Scottish Seafood Investments bought out the troubled Argyll-based firm earlier this year, in a deal that will clear debts to the tune of £3.5m. Picture: Marc Turner

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TIM SHARP

The Argyll-based company said it sold out to Scottish Seafood Investments (SSI), a vehicle backed by the Scottish Salmon Company and private equity firm Northern Link, after being hit by a leap in the price of salmon, deteriorating cash flow and the weight of expensive debt.

Turnover at Loch Fyne Oysters rose 5.3% to £23.5m during the year to June 30, on the back of a 15% growth in exports.However, having made an operating profit the previous year, it recorded an operating loss of £480,000. This combined with various write-offs, including the acquisition costs of 2008 purchase Surrey-based Simson's Fisheries, led to a pre-tax loss of £1.6m for the year, against a £45,000 deficit in 2010.The directors of the company said in their report: "The year to June 30, 2011, proved to be very challenging with a number of factors conspiring to put pressure on both profitability and cash flow."Industry dynamics resulted in substantial inflationary pressure on the price of salmon, by far our most important product, and the pressure on consumer disposable incomes made it difficult to pass on all of the raw material increase."The company was also hit by harsh weather in December 2010, its busiest month, which affected its harvesting and forced it to buy in more products to fulfil orders.Rising fuel prices also weighed on the company.Cashflow of £607,000 in 2010, dropped to just £147,000 in the 2011 financial year while its finance servicing totalled £281,000.Net debt rose by £435,000 to £3.5m. The deal with SSI signed earlier this year will clear that debt.The directors added: "Employee ownership has been a great success at LFO [Loch Fyne Oysters] and has provided great stability over a period when both founders departed the business."However the company had to address weaknesses in its capital structure which restricted the ability to attract capital, fund growth, and left the company with a deteriorating cash flow due to being financed by relatively restrictive and expensive debt."Loch Fyne Oysters was set up in 1978 by wine merchant and estate owner Johnny Noble and marine biologist Andy Lane.SSI was formed last year and funded acquisition vehicle Associated Seafoods in takeovers of salmon smoker Lossie Seafoods and prawn processor Moray Seafoods.

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Loch Fyne Oysters in the red before cash injection

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