SKE half yearly, page-87

Full disclosure here, I am short SKE mainly due to the rapid deterioration in operating conditions and the negative effect this is having on its liquidity. Some more detail below:
The elephant in the room is the increase in accounts receivable (AR) to A$328.7m which is around 1.5x SKE's market cap. AR grew by A$80m in one half! Even taking seasonality into account, this is an abnormally large increase. Days outstanding ticked up from 44 to 52 – the highest on record (including the GFC) and the resulting AR turnover decreased to 8.2 to 7. This may indicate the stress some of SKE’s clients are currently facing and in my opinion will continue to face.
Add to this a debt pile that continues to get bigger. Total debt is now at A$235m up from A$38m only 3 years ago. Debt to EBITDA is at 2.63 x which is within the bounds of comfort but the rate of deterioration of this ratio is alarming. Luckily though, as stated in the 1H summary SKE can draw down another A$200m…good for them, I’m sure they will be forced to draw down the entire amount over the coming year or two.
Interestingly, LT debt increased by A$50mln over the 1H period without any associated capex or investment that I can see. Working back, I can only assume that this was to fund working capital in addition to funding the dividend. We all know how this story ends. SKE does not have the cash-flow available to fund this dividend. Im sure management are aware of this but continue to kick the can down the road… the alternative is a 40% drop in the share price... No easy decisions here.
I see it as unlikely that the takeover with PRG will proceed. What were PRG thinking anyway..? Further confirming this view is the continuous sell down by Greg Hargraves and Invesco. If I were PRG, I would stay away and let SKE drive itself into the ground.
All in all I think the share price is accurately reflecting the operating conditions of the company. It’s plainly obvious to anyone that can read a balance sheet. For the shorts, the next catalyst will be a cut to the dividend and/or potential bad debts arising from the difficult operating conditions in the marine and O&G space.