Cobra aims to be debt free in five years

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Debt-to-capital ratio rose to 61% in 2010/2011

Broking group Cobra is planning to be completely free of debt in five years’ time, according to chief executive Stephen Burrows.

“We are looking at the maximum of a five-year timetable – assuming our plans don’t change,” Burrows said.

His comments come as Cobra revealed that its gearing ratio – debt as a percentage of overall capital – rose to 61% in the year to 31 March 2011 from 58% the previous financial year.

While net debt fell 3% to £15.3m from £15.8m, the equity portion of Cobra’s capital base dropped 16% to £9.6m from £11.4m, increasing the proportion of debt in the overall capital base.

Equity fell because Cobra made an after tax loss of £1.9m in 2010/2011, following a £1.5m goodwill writedown related to the sale of its Caterham and Alton operations to ASG Risk Management.

However, Burrows explains that the writedown has not affected Cobra’s cash position, allowing it to continue paying down debt, and the proceeds from the sale of the two units will allow faster debt payment.

Cobra will receive an initial £5.49m payment on completion of the sale of the two units, and a £2.7m cash earn-out over the next two years.