BHS profits, liquidity and cash flows 2009 - 2014

The six-year financial track record of BHS, three of which show huge balance sheet deficits that Dominic Chappell bought from Phillip Green for a pound.

BHS - Accounts Analysis 2009 - 2014

The following table shows six years of the key profits, net current assets (i.e. working capital) and cash flows of BHS from 2009 to 2014. The summary is sourced from the audited accounts of BHS Ltd.

  2014 2013 2012 2011 2010 2009
Operating Profit / Loss -55,278,000 -50,319,000 -65,727,000 -43,661,000 -6,225,000 -56,330,000
Working Capital / Deficit -186,286,000 -152,323,000 -103,630,000 -49,918,000 -96,392,000 -88,473,000
Net Assets / Liabilities -145,152,000 -68,687,000 -7,209,000 79,401,000 120,653,000 129,789,000
Pensions Surplus / Deficit -111,136,000 -109,315,000 -73,109,000 -79,071,000 -118,134,000 -99,288,000
Total Net Assets / Liabilities -256,288,000 -178,812,000 -80,318,000 330,000 2,519,000 30,501,000

BHS - Operating Profit / Loss

The most important number in any profit and loss statement is that for operating profit. This shows how much profit the business has made from its core trading (operating) activity and nothing else.

An operating loss is not unusual in a difficult year but that will call for for management to use reasonable care, skill and diligence (Companies act sec. 174) to prevent a repeat. Indeed some effort towards that appears to have been the case throughout 2010 when losses were significantly reduced. However from 2011 chronic BHS losses returned with a vengeance.

There is no question though that by 2012 BHS should have been put into administration to mitigate further losses. Not only was the company technically cash flow insolvent (i.e. working capital in deficit) its balance sheet had gone into deficit to the tune of £80 million too.

BHS - Working Capital Insolvency

The killer financial year for BHS was that ending in March 2004. That year returned a profit after tax of £72,256,000. Green however then declared a dividend of £220,000,000. 

While historical retained profits remained positive the real damage this dividend did to the company's fortunes was in turning what would have been positive working capital of £56,476,000 into a working capital deficit of £163,524,000.

Working capital is the difference between cash and current assets (e. g. stock-in-trade and accounts receivable) that can be reasonably expected to be turned into cash within a year, less creditors due for payment within the year. It describes liquidity and if liquidity is in deficit cash flow insolvency is inevitable. Certainly, flogging off BHS for less than the cost of a bar of chocolate was never going to change that..

BHS - Balance Sheet Insolvency

Total net assets (all assets less all liabilities) in deficit represents balance sheet insolvency.

In a sense the BHS balance sheet insolvency was academic. Lack of operating cash flows should have precipitated an insolvency crisis before that point has been reached. it was only ever increasing levels of external debt and credit from its suppliers that BHS was unlikely ever to be in a position to repay that enabled the company to survive for as long as it did.

The state of BHS balance sheets for the three years to August 2014 are especially shocking. If you want to see what a solvent balance sheet ought to look like, follow the link for its forecast below.

Corporation Tax and Marginal Relief From 2023 Deferred Income Explained What is a Monthly Cash Flow Forecast What is Pretax Profit How does a balance sheet balance? Lockdown Recovery: Forecasting Profits, Cash and Finance. How to Apply for Business Interruption Scheme with Figurewizard How to calculate liquidity and short-term liquidity How to calculate markup and margin The Truth about Monarch Airlines Labour's Spending over 10 years from 2000 How to make profits and not run out of cash Credit Checking - How to Read Micro or Short Form Accounts Amortisation of Arrangement Fees for Long Term Loans BHS Profits Performance 2010 - 2014 BHS profits, liquidity and cash flows 2009 - 2014 How to Calculate a Free Cash Flow Forecast Campari: How to apply for a bank business loan What are Current Liabilities What are Current Assets Late Payers and Cash Flow What is Operating Cash Flow? What is Working Capital How to Read a Balance Sheet Business Planning Cash Flow Calculator Short Term Liquidity Business Liquidity Corporation Tax is not Calculated on Net Profit Small Business Corporation Tax Cash Flow Calculator Using Figurewizard - VAT Using Figurewizard - Sales by Month Using Figurewizard - HP or Instalment Plan Budgets Using Figurewizard - How the budgeted cash flow forecast is calculated Using Figurewizard - Fixed Asset Budgets Using Figurewizard - Calculate Purchase of Goods Using Figurewizard - Forecasting Payments to Suppliers Using Figurewizard - How to Forecast Cash Collection Solvency and the Balance Sheet Property in the Balance Sheet Why Equity is a Liability Asset Management and Liquidity Selling Fixed Assets Contracts: Invitation to Treat What is Deferred Income Loss on the Sale of Fixed Assets Calculating Gross Profit Margin Profit and Loss Statement What is Operating Profit What is Net Operating Revenue What is Equity Profit on the Sale of Fixed Assets How Taxable Profit is Calculated What are Operating Overheads Overheads - Provisions How Depreciation is Calculated What is Business Operating Activity What are Fixed Assets Liquidity and Cash Flow Balance Sheet Liabilities and Leases Stock or Inventory Control What is Distressed Stock or Inventory What is Interest Suspense Account Product Safety Laws What is a Bill of Exchange What is Payment at Sight What is a Pro Forma Invoice What is a Bill of Lading What is a packing note What is Demurrage Cash Flow Forecasts and Planning Factoring: Invoice Discounting and Cash Flow How Does VAT Work Figurewizard as a Sales Aid for Factoring and Invoice Discounting