Tag Archives: Ernst and Young

Good thoughts and less so

It all started so nice, the morning was nice and sunny (its winter and my laptop was fixed), so as I was enjoying a laptop with a good space bar, my youth came calling through a knocker like a sledgehammer. After 84 years Olympus is stopping. My second camera was an Olympus, an OM-10, which was followed 2 years later with the OM-2, a camera I never stopped worshipping. Olympus was on the tip of all tongues, on the edge of what was possible and they were giving Nikon a fight, Cannon was not that big (but in an impressive stage) and Minolta was there as well. It is in that age that photography started to become affordable. And in this age they have faltered. It is a shame, but there were indicators that they were lagging more and more and the mobile phones with their less is merely one factor. Age is there to distinguish of what is in the now and what will no longer be, a playing field the forever in turmoil. 

And it is that turmoil that matters, even as Olympus went under in an honourable way, some competitors in other fields were not that lucky. That can be said of Wirecard, a company that had apparently $2,000,000,000 on the books that did not exist and is now in a state where they owe $4,000,000,000 and have no way to pay it, alas Wirecard, out you go! So can anyone explain to me how one person did this? 

I believe it a lot more and as we see Reuters giving us “Wirecard is the first member of Germany’s prestigious DAX stock index to go bust, barely two years after winning a spot among the country’s biggest 30 listed companies with a market valuation of $28 billion.” I wonder how the $28,000,000,000 was achieved, in a stage where 7% did not exist, there is every chance that the damage is larger and spread in a larger stage, and we merely see on what was NOT signed off on. Is that such a weird consideration? Whilst some make calls for reforms, which is a call for change, yet the need to identify the things not being OK will also be less likely to be found, that is the nature of things. You se, I see more, it is seen in the quote “once one of the hottest financial technology companies in Europe, dwarfs other German corporate failures. It has shaken the country’s financial establishment”, if it was the hottest Financial technology company, the technology is still there, the question was was it abused and more important, how can something this so called hot, be this flawed? How do you show $2,000,000,000 you do not have?

Then there is “German law firm Schirp & Partner said that with Wirecard now effectively sidelined, it would file class actions against EY on behalf of both shareholders and bondholders”, so EY does not sign off on the books and they get to be in the dock? Questions rise to the sirface, do they not? I would reckon that in that stage the UK would need a much better setting towards the economy, especially as the banking sector will be in the rough until the end of the year, so the UJK gets to be lucky as we see ‘China’s Huawei to build $1.2 billion research facility in England’, it gives the light towards a growth inn 5G options for the UK as Huawei is trying to be nice to the EU (they need to) and as the US is in a stage of collapse, it makes sense for Huawei to set the stage to a larger field. The step makes sense win a few levels, even as some will state that the mainland of the EU would be better, appeasing the UK will also have its influence in Australia and Canada. Two much larger players and as such Huawei is going to be moving forward. It is therefor weird that 6 minutes later everyone’s favourite Labour puppet Tony Blair gives us ‘Britain should side with U.S. over Huawei, former PM Blair says’, Well one could argue that he is deep in American pockets, can we not? So when we mull over ““I think we do need to make a call and I think it has got to be pro-U.S. in the end,” Blair said when asked about Huawei at a Reuters Newsmaker event. “It is very hard for us not to be with the U.S. on anything that touches U.S. security.””, so why? America has not now, not ever produced any evidence that gives rise to the imaginative danger of China via Huawei. In addition, where was the US when Wirecard had created the imaginative $2,000,000,000, none had seemingly a clue and now that the pied piper is piping they have no issues making a move on EY being the optional culprit in this. 

We need to change the way we do business and as we see how valid makers like Olympics go under without doing anything wrong, we need to set much larger question marks on evidence and demanding it sooner from people on every level of government administration, even former elected officials making claims and especially when they are willing to to rely on evidence, so when we look at Wirecard, take in mind that we need to demand the clear setting on how $2,000,000,000 could be created out of thin air (my bank account needs a bit of that too).

 

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Shrine of the Tooth Fairy

It has been almost three months since I wrote ‘One to the hospital, one to the morgue‘ (at https://lawlordtobe.com/2018/12/17/one-to-the-hospital-one-to-the-morgue/), it was all about Interserve and new we see that not only did I see matters correctly. One of my finest diplomatic moments was seen with: “we see the mention of “limiting the cost issue by 1.8%, whilst adding debt reduction by 5% in two years’ time is exactly the message in a stage how we should read it, A Joke!”, oh and that is all whilst in those 7 months £300 million was added to the debt, is anyone waking up yet?“. The Guardian gives us less than 5 hours ago (at https://www.theguardian.com/business/2019/mar/14/interserve-shareholders-vote-restructuring-plan-emergency-meeting) ‘Interserve could enter administration as it fights for restructuring‘, we see that options are considered at the shareholders meeting on Friday, that whilst the actions see now could have been done three months ago. Inaction comes at a price but not for the decision makers who got paid for every day of inaction, and a lot more than the sum of most incomes of those about to lose a job (OK that was an exaggeration). And when we see: “their verdict at an emergency meeting on Friday on a proposal put forward by banks and hedge funds, which have offered to forego £485m of the company’s £631m debt in return for most of its equity, leaving existing investors with just 5% of the shares” I am actually more worried, not less. In the first what happens to the outstanding £146 million of debt? That remains apart from a loss of 95% on the shares for the ‘investors’. We should acknowledge “The US hedge fund Coltrane, the largest shareholder with a stake of nearly 28%, has been holding out for a better offer and may command enough support to derail the plan.” Yet when I also consider ‘on a proposal put forward by banks and hedge funds‘, we need to consider that Coltrane already put a safety net in place, they have not been sitting still for three months. That safety net is shown at the very end of the article with: “The US hedge fund is understood to have indicated that it would be happy to allow the company to go into administration and would seek to negotiate with EY to cherry-pick parts of the business to buy“, a non-solution for Coltrane will be a stage where they get all the cream of the herd and owning 28% of that non loss driving mess, we cannot really blame them can we?

In the article one other part stood out. When we see: “maintaining military bases in the Falklands” I wonder whether this is part of a much larger military contract, and if not, what were they thinking? I am not against military contracts, far from that, but to add one in the middle of nowhere, where their only lifeline are charters from Santiago Chili, as well as a military flights twice a week from Brize Norton (apart from some cruise boats every now and then). When you consider that the closest land is 800 Km away, and the flight from Santiago is 2200 Km, which equate to a flight from London to Libya, we see that this one project alone requires us to look into the depth of decision making. It connects to the larger whole. If we consider that the military contracts were lucrative, isolating them and making them a foundation would have made perfect sense. the fact that the military contract(s) are up for grab in an age when we see all the noise on Huawei and non-proven dangers, all while Interserve is screwing over military security through their decision cloud of non-clarity gives rise to a lot more questions on a several fronts, don’t you think?

And the fun does not end; when we see another source giving us both ‘Interserve calls for ‘positive thoughts’ ahead of crunch vote‘, as well as ‘Employees urged to use social media to say contractor is a ‘great place to work’‘, we see another path that is ignored. The source was the Financial Times (at https://www.ft.com/content/0be957a6-4663-11e9-a965-23d669740bfb), yet the missing part is that the board of Interserve put themselves too thin on the board whilst there were plenty of indications that they were risking too much. Like players in three card poker, betting too much, too often and not having the money to cover the bets. Unless you are the house with all the capital you cannot win that equation. Winning the lottery has better odds at that point. So when we see: “The power point presentation — seen by the Financial Times — suggests that employees share on Facebook or tweet “what a great place Interserve is to work and why,” or how we “continue to win bids and contracts and deliver an excellent service to our customers”” I see a different version. I see the board all paying at the shrine of the tooth fairy for pain relief 297 seconds before the root canal starts and the surgeon is all out of Triazolam. Optional the dentist has Flunitrazepam (read: Rohypnol), yet the patient could end up getting screwed in the process and live with a gap in their memory on whether it happened or not. It sounds harsh, but that is the setting.

The matter gets clear when we consider the quote in the FT: ““Value is being lost every day in Interserve,” said one person close to the board. “If we go through a pre-pack there is more noise around the business and it could take months for suppliers to understand.”“. A part I already clearly saw three months ago. There was no other path there. the view was clear (to me at least) when you looked into the projects that have been up for media presentation, whilst the bulk of all other matters would have been above 0, that would have been the strength of negotiation for Interserve, but it was not to be. Even as the government was steady and willing to award more projects, there should have been a clear path showing the last 12 projects and the gains made in those projects. It was not done, was it? On December 17th the Financial Times made a similar observation (at https://www.ft.com/content/a15ed306-ffaf-11e8-aebf-99e208d3e521), yet there they employed that awkward concept called diplomacy. They gave us: ““The government refused to bail out the company despite the number of contracts involved,” said Tom Sasse, senior researcher at the Institute of Government. “This exploded the idea that the government would always bail out the sector.” Austerity, initially the sector’s friend, has also been its undoing“, I personally believe that part of the board of Interserve were still in the delusional stage that ‘too big to fail‘ could optionally apply to them. The finicky part where the UK government is close to two trillion in debt (£1,900,000,000,000) seems to have been forgotten by everyone. It limits actions for all involved, and next to that the business model of Interserve was less supportive than a soaked tea towel, so go figure!

Next to that we also see: “Some contractors — such as Interserve — had been drawn into services through private finance initiative projects, which packaged up the construction with the service delivery” and that is where the Falklands come back into the limelight, the model of services without construction is a very different part in all that and only if there are long term settings in place, the Falklands does not fit that bill. Now, I can understand perfectly that Defence stated: ‘You can do that, if you also do this!‘ It makes perfect sense, yet that is not really shown in the larger picture and if the other projects are below zero whilst the service elements are still part of the costing, we see a shifted picture, implying that they are hiding behind the ‘recycling’ part, yet the overall image was not as rosy, it was flawed on a much larger scale. This is how I personally see it, and so far my view has been shown to be correct. So if the nightmare continues Coltrane gets all the cream (or the bulk of it) and they can continue, the rest is screwed in a massive way and there will be no Rohypnol available when the tooth fairy comes by stating: ‘Wide open please!

The news does not end there

Just hours ago, the Financial Times gives us (at https://www.ft.com/content/79f20d9a-463d-11e9-a965-23d669740bfb) ‘UK outsourcer Capita posts big fall in profits‘. It is not nearly a sign of the times, it is crunch time, and the service required from certain parties can no longer be afforded. So when we see: “outsourcer faced a decline in work from local authorities, underscoring the challenge of overhauling the business“, that was never ever a secret, the cash is close to gone. Other solutions need to be sought out and that was a given before Brexit started. Brexit will allow the UK to get back up stronger, but it will be after a nasty negative wave, there was never any doubt on that. I informed my readers of that clear danger for years. So this is not news, I never gave consideration to the impact on outsourcers (not my call of duty), but those who work in that field should clearly have been equally aware, that part can be proven without the shadow of a doubt. In all this, from my personal point of view, when we see a 5% drop in revenue, whilst we also get “pre-tax profits fell 26 per cent to £282.1m last year“, we see a more dangerous path in that. It means that the setting of service versus construction (or better the stage of basic profit) has not been correctly set by these players and it merely shows the dangerous path that Interserve has been on for the longest of times. This could have been clearly predicted on a few data mining pathways.

I am now making a speculative view on a speculative stage based on a data stage that might not even exist. I will pose questions to the data board of Interserve:

  1. Show all projects that yielded above £2 million profit
  2. Link to these all directly linked service projects
  3. Link to that all indirectly linked service projects.
  4. Now show final profits for these data trees.
  5. Add to this the elements staff required and cost of staff
  6. Set a separate tree for the Falklands with items 1 through 3, show that final financial result with staff cost continued over time.
  7. Show the other projects with cost, staff cost and total negative profit.

These seven questions will reveal a nightmare tree, the one Bonsai tree that will break your neck when you fall from it. That is the setting we need to have been mindful of. That is optionally the stage that could show the failing of Interserve and other outsources to a much larger degree; the overall mention of so much more revenue, whilst the entire profit part is back benched for too much and for far too long.

The issue of Interserve et al and their stage of what constitutes ‘sound business’ whilst the dangers of what is around the next corner is ignored by way too many shows a multitude of failures and the inaction from too many people gives rise to other levels of dangers that should not have been ignored, although at that time we cannot fault Interserve et al for ignoring those dangers to some degree, yet with the dangers already on their table ignoring them was not a good idea to maintain, or even a great notion to begin with, not with the livelihood of well over 45,000 people at stake.

 

 

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The double sided blade

I stumbled upon a situation last night that gives food for thought. You see, I am the first one to give way to those who are growing an actual business, those who are there to be true captains of industry. Yet what defines a captain of industry nowadays? What if the person is stated to be an entrepreneur, investor, and philanthropist; yet, the information given to us makes that person a mere oppressor, a borrower and an antagonist or opposer? In this case I am talking about Jeff Bezos, the man behind Amazon. Multi billionaire before he became half a century old, making him more successful than Bruce Wayne without the cape and the niceties.

So where does my view come from?

That is an important part, because other whiles it would just be envy, which in my condition isn’t entirely untrue either. The part that set it off yesterday was in the Guardian (at https://www.theguardian.com/technology/2016/dec/11/amazon-accused-of-intolerable-conditions-at-scottish-warehouse). We could agree that the subtitle is merely an emotional part, yet the consideration it gives when we read ‘Willie Rennie claims workers are paid so little some camp outside warehouse in tents to cut commuting costs’, depending on the distance, we can agree that alternative solutions would be found and it is not up to an employer to decide how any employee is deciding on their budget.

Yet when we see the following elements:

  1. All permanent and temporary Amazon workers start on £7.35 an hour or more and earn at least £11 an hour for overtime (The new national living wage is £7.20 for workers aged over 25).
  2. Amazon has been accused of creating “intolerable working conditions” after allegations that workers have been penalised for sick days and that some are camping near one of its warehouses to save money commuting to work.
  3. A Sunday Times investigation found that temporary workers at the warehouse were being penalised for taking time off sick and put under pressure to hit targets for picking orders.

So are my impressions founded? You see, point one gives way that the Amazon is acting within their right and as such Amazon does nothing wrong, as stated before is there an issue as we see point two? There are clear labour laws, you get a number of sick days, but you need to build up that right, so again is there a wrongdoing? Item three repeats item 2, giving additional questions when an article seems to rehash a point, yet in addition the requirement for targets and pressure are a clear issue. The question becomes are these targets realistic? If they are not then there is an issue.

Yet this is not the only side in all this. In addition there is the part we would have seen in the Daily Record (at http://www.dailyrecord.co.uk/news/scottish-news/politicians-union-leaders-urge-snp-7235948), more important that this news was from January 2016, so the issue is not really new. The issues in that part is: “Rennie clashed with Sturgeon over the issue at Holyrood on Thursday, highlighting a £1 million grant given to Amazon in the past year alone. The UK arm of the business paid just £11.9 million in tax in 2014, despite taking in £5.3 billion from British shoppers“, which implies that a company making £5.3 billion, only pays £11.9 million in tax in 2014 and got a £1 million grant last year. Now, we can see that three could be an issue, but where are the direct links? You see, Revenue is one, profit is another and after that there is taxation. We can put a straight argument that 5 billion would require more than 10 million in taxation (11 million minus a grant), yet what possessed the giving party to give that 1 million grant? Why was only 11 million in taxation paid? None is this reflects on Jeff Bezos, this is not a failure of the maker of Amazon, but a failure from the governing parties giving out cash where the requirements in light of revenue was nowhere near any justification of any grants, especially when we consider Forbes, who stated that Amazon boss Jeff Bezos ‘added $20 billion to his net worth over the 12 months through late September 2016‘, so, based on how much revenue and profit brought the increased net worth? The newspapers are extremely non-revealing on this. Now consider the two sources, the fact that some was known for nearly a year, we could ask questions from these agencies hiring, we could ask questions at the HR offices of Amazon in the UK and Scotland, yet in all this, were any errors, any transgressions made? Amazon is a business and its concern is profit plain and simple. The fact that according to the initial part that Amazon pays £0.10 per hour above a living wage, we could consider the firm to be Scrooge like which is not a crime! Now we need to look at two elements. The first is the definition of a living wage, which is regarded by several sources as ‘a living wage is the minimum income necessary for a worker to meet their basic needs’. Yet what are basic needs and where does that end? In addition we should consider that the living wage should be substantial enough to ensure that no more than 30% of it needs to be spent on housing. Which is interesting, because that is nowhere near realistic in many places. In larger places, we either need to consider growing cost of commuting or consider that £144 pw is not the cheapest in Scotland and not that sizeable. So at a working week of 40 hours the rent is 48%, implying that the living wage is far below expectations or realism. The only way to get near a living wage is to work a full day extra in overtime, yet in all this the cost of living is not considered, so we have a CEO who is getting demonized here (by yours truly), yet what wrong has he done? From the parts I can see, there seems to be enough evidence to see that there is no wrongdoing on the surface, yet we can in equal measure debate whether he can call himself a philanthropist. If you are spending money on one side by being a ruthless almost cutthroat like business man on the other, they should be cancelling each other out. Is he validly under the same conditions really an investor? If he is using the guise of tax deductibility, is he actually investing or is he relocating funds that were due to HM Revenue & Customs? Relocating some (read: most) of these funds so that they benefit the ‘personal goals‘ of Amazon. Is that really investing? Lastly there is the title of entrepreneur. If we accept the definition: ‘a person who sets up a business or businesses, taking on financial risks in the hope of profit‘, well Amazon has been here for a while, so setting up? We could see it in light of franchises, does that count? And as for taking on financial risk? With the league of tax write offs and grants, should he be allowed to call himself an entrepreneur?

So perhaps the titles or entitlements given to Jeff Bezos are no longer valid, is that a valid view, does this warrant demonization? Off course is does not, because that would be unjust. Yet, we seem to focus on the ‘stamps’ we are giving a successful person, whilst in the cold light of day we overlook the non-repayable funds given to Amazon. In addition, when we look at the independent (at http://www.independent.co.uk/money/tax/revealed-amazon-earns-more-through-government-grants-than-it-pays-in-tax-8617919.html), where in May 2013, the following was given to the public: “Amazon paid less in UK corporation tax last year than it received in government grants, its official company accounts have revealed – sparking condemnation from MPs around the country“, which happened in 2013. We now get another side that is not with Jeff Bezos, but with parliament and elected officials. Yet that news did not really make it to the massive forefront (other than Willie Rennie who seems to shout for attention). You see, if I can be harsh on Jeff, I need to be equally be harsh on Willie and in that regard the fact that the Amazon issues have been on the papers for the longest of times, implies equally that there either is no political issue, or that the most in charge have not committed to anything towards the workers who feel wronged, yet are any laws broken? That is the issue we need to address. What is valid and what is of concern is the labels we seem to bestow on people. For what reason? We can argue that enabling through tax laws does not make a person an investor and the £5.3 billion gains against £11.9 million taxation is equally incomplete more important, how much was exactly invested by Amazon and where? Even if we accept certain labels and certain values, we need to equally accept that the old values entrepreneur, investor, and philanthropist are no longer what they seemed to be. In a world of constants, we see the change and evolution of entitlements on a nearly daily basis giving us less to hold onto and even less than that to consider as the stability of an impression in a constantly changing world.

How is that fair on those who truly were philanthropists, investors, and entrepreneurs?

So until the true investigation, if it happens at all, Jeff Bezos might not be seen as a borrower, an antagonist or opposer. Yet at this point there is in addition nowhere near the clear evidence available to see him as an oppressor, that part would only be seen in the eyes of the workers who decided to stay in tents, to avoid travel costs that does not make him an oppressor. In addition, what scrutiny have the agencies been going through? The smallest quote in the Guardian stating: “Staff have to pay to catch an agency-provided bus to the Dunfermline site” gives us the part where we need to ask how much people have to pay and was this clearly communicated to them in the beginning?

In the end, we need to take a look at what is going on at the Dunfermline site. Is it merely Liberal Democrat shouts for attention via Amazon?  If not, considering that this has been going on for quite some time, how have officials failed and in addition, who signed off on the grants for Amazon? All valid issues and without clear answers we can only see Jeff Bezon as a shrewd business man, which is not a crime and not a valid push for demonization of him in person.

And the hidden messages we now see regarding the whistle-blowers and Google taxation? The independent is giving a nice line, in between the lines of Amazon, yet why is this not seen in a clear tax audit? If there is an issue not reported or not seen by Ernst and Young, it means that either the tax laws are not clear enough, or that Ernst and Young is shown to be unable to do its job. This would be a valid discussion with PwC, yet is there any clear indications with E&Y? And who were those whistle blowers? What many are ignoring is that the benefit of a global company means that you have global options, which is the clear benefit that Amazon is using as well. The fact that politicians have been unwilling to make changes to tax laws makes them negligent and possibly incompetent, not the large corporations, a part clearly not seen in any of the articles. So like Ed Balls, we see another politician shouting for the limelight, yet is there clear wrongdoing?

It seems that this is sidestepped by several parties and when we consider that the sources I mentioned are news sources, perhaps they are missing the plot too, but that just a small speculation from my side. We look at a double sided blade, Amazon and Google alike will slice from the revenue on one side, yet they will in equal measure slice from entitlements within legal limits from the other side of the blade because the option was given to them. Given to them, not taken by them, there is a clear difference and politicians are at the core of that largely diminished roast being presented.

 

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The Sound of silence

Hello accountant, my dark fate
your books are bloated as of late
the need for bonus loudly creeping
to be deposited so fleeting
and the greedy that are filling
their domain, they always gain
it is the need for money

The P W C accounting firm
will gain support, another turn
you see the press is staying quiet
we wonder now who got them hired
see the news is remaining just the same, it’s such a shame
and they should all be fired

You might think why this rewritten song of Simon and Garfunkel? You see, it has been almost 50 years exactly that Simon and Garfunkel took this to paper, 50 years later we would see quite the different ballad, one that would see repercussions in ways never seen before, yet both instances unique. That part was made clear today when we see ‘Tesco posts record loss: what the experts say‘ (at http://www.theguardian.com/business/2015/apr/22/tesco-posts-record-loss-what-the-experts-say). So when we see “Tesco reports record £6.4bn loss” and when we see ‘these experts’, you and me alike should ask a series of questions the press is not asking. It has not been asking them for 2 quarters now (well an absolute minimum).

Consider the following quote: “Soon after his arrival, Lewis unveiled a £263m accounting scandal caused by overoptimistic recording of payments made to Tesco by suppliers. Tesco is under investigation by the Serious Fraud Office and the supermarket regulator over the affair“, this is what got it all started, what the publishing pussies refer to as ‘overoptimistic recording of payments‘ turned out to be nothing less than a systematic issue as we saw some of the news from DeLoitte. It is shown in my ‘adjusted lyrics’:

Will gain support, another turn
you see the press is staying quiet
we wonder now who got them hired

You see, there is the Sound of Silence, an actual silence. Try finding anything regarding Tesco in 2015 regarding PricewaterhouseCoopers. You will find very very little, pretty much the absolute minimum. Perhaps you remember the wild allegations on the ‘MH370 suicide flight‘, in addition, all those claims regarding the World Cup soccer in Qatar 2022. Yet, in regards to PwC the Murdoch machine stays very quiet. I regard that this makes Rupert Murdoch the biggest pussy in newspaper publication since the newspaper concept started in the 17th century.

It took just less than two hours to realise that PwC needed investigation, the papers made close to zero mention on it, there were some casual mentions regarding ‘asking questions’, but it was as low key as technologically possible. In December 2014 it pretty much stops, feel free to try and Google it for yourself. You will find articles on how Sainsbury switches from PwC to Ernst and Young (January 16th 2015), but for the rest there is too much nothing. Not just the Murdoch groups, but in equal measure, you will find little to nothing regarding PricewaterhouseCoopers. Is that not strange? Especially as we now see how £263m inflation, caused a £6.4bn deflation. A result 24:1, it became such an interesting long term bet to make, especially by those involved. Yet many of those players are shrouded in silence.

You see another matter suddenly dawned on me. I reckon you all remember Julian Assange, from all those cables regarding the Afghan war. 5 days ago, they decided to also go public on all those Sony hacked cables. We see the quote: “This archive shows the inner workings of an influential multinational corporation. It is newsworthy and at the centre of a geopolitical conflict. It belongs in the public domain“. No Mr Assange! You decided to play god with stolen data and you decided the fate of this corporation by hanging out the laundry, in addition, you handed the power they wielded and threw it up in the air to be taken over by any competitor who can grow in directions they never bothered to look, because they could not be bothered taking the effort.

And as we are talking into the public domain Julian, what happened to your ‘bravery’ when you made the quote “In November, WikiLeaks founder Julian Assange told Forbes the site has a ‘mega leak’ on an unnamed major US bank exposing an ‘ecosystem of corruption’ that will be released early this year?” I am pretty sure that this never went public. I searched high and low and your WikiLeaks page shows nothing there either. It seems to me that many parties are too scared when it comes to banks and financial institutions.

The question should be Did Julian Assange have anything ever regarding his claims on an ‘ecosystem of corruption’ in regards to a US bank. Should I not ask that question? You see, when the press at large ignores the PwC issue, many should ask questions, especially as both Tesco and Greece fill pages of text in the Guardian and several other newspapers, yet the hunt for information regarding PwC is not moving forward.

In the first article mentioned, where we see the dubious term ‘what the experts say’, NO MENTION AT ALL on PricewaterhouseCoopers (or PwC), is that not strange? The question how 10 million in costs (which I converted to 199 full time accountants working on Tesco for a full year alone) did not reveal anything in time, so how could such a managed event stay hidden? In several articles we see a similar quote as I am adding here, a quote that in many cases was the very first paragraph of articles late October 2013. “DELOITTE has completed its review of Tesco’s overstated half-yearly results and confirmed that its black hole is even bigger than the £250m previously declared and goes back even further than the supermarket group had originally stated“, which means that these auditors ‘missed’ it for a longer period of time. A thought I had in the first few hours, was confirmed a month later (which is fair enough, they hard to check many numbers before stating anything), yet I saw and reported on this (as well as my thoughts), having no economic degree, just me as an analyst saw what the press has been ignoring ever since.

One of the more revealing articles was in the Financial Times named ‘UK accountancy watchdog hits PwC with two separate probes‘ (at http://www.ft.com/cms/s/0/98e02452-89c8-11e4-9dbf-00144feabdc0.html#axzz3Y3cymr54), which was in late December 2014, after that the news and the hunt for the Priced and watered Coopers stops on nearly all media fronts. I wonder how they pulled that one of. The fact that there is almost no visibility on the two probes is only more cause for concern, but those experts all have ‘something’ to say in this matter. Isn’t it nice that they did not have anything to say, or did not say it out loud before the calamity was seen. All those Tesco projects, ready to roll, not one came with the considerations ‘Tesco is spreading itself too thin‘, which is nice before the fact, but pointless, bordering on clueless after the fact. I especially liked the quote from Mike Dennis from Cantor Fitzgerald, you know, one of those after the facts proclaimers. “We believe Tesco should consider closing 200 underperforming supermarkets/superstores and focus on growing the more profitable remaining 700 stores (excluding Express); in addition, this should also allow for £40m of cost-savings from the closure of a distribution centre“, you see, my issue is twofold.

The first is where the ‘under’ performing line lies. Is underperforming, working at a loss, or at a minimal profit? The reality remains that people need groceries, so if an ‘underperforming’ shop is closed another will open with a different label and now that lost revenue will go somewhere else. My second issue is that 40 million in savings. You see, if those 200 shops are spread all over, that distribution centre will still be needed, even if the amount of stores decreases, someone will need to open a grocery store and this distribution centre could service independent supermarkets to some degree, meaning a small additional revenue. Then we get the second set of debatable solutions “Matt Davies, Tesco’s UK CEO as of 1 June, should consider a further reduction in staff and a significant simplification of central functions and category management. Aldi UK today generates twice the sales per full-time employee compared to Tesco UK and is expected to report higher trading profits“, reduction on staff? Where? You see, it is nice to ‘opt’ for simplification, but in my experience in 100% of the cases, simplification was not a bad thing, but it came at some expense, what is that expense and will it hurt down the line? The biggest fun can be seen when you read the part of Philip Benton. It all reads nice, but the issue I have is at the end in this case. “The retailer is in the midst of a huge restructuring after selling off much of its portfolio including Blinkbox and Tesco Broadband as well as the forthcoming sale of market research unit Dunnhumby and undergoing a complete overhaul of its leadership“, my issue is the possible ‘inflated’ that Dunnhumby represents. You see, it could be regarded as inflated as its value is determined by what the buyers will offer. In the end Dunnhumby represents well over 140 million a year and it also represents undocumented savings. You see, if a lot of the marketing and visibility research is done at market value, Tesco will face that they either deal with additional costs (not small ones) or not do the research. Both are bad ideas. None of these ‘experts’ are looking into the amalgamation of services that Dunnhumby could offer via Tesco and/or for Tesco. Dunnhumby is a massive data warehouse and it should have loads of options. Moreover offering these additional services (in the trend that Google has done with ‘Gmail for work’ could open up new capital gaining opportunities. Now, as the economy is slowly starting over the next 3 years, those who grow could need data insight that is currently available via Dunnhumby. This means financial and revenue growth that shows a healthy future, giving that away in some sale to recoup 2 billion, from a 6 billion loss that was all based upon degraded value seems like a very bad idea to me. Even if most of that 2 billion is recovered, the invoices that follow will put pressure for a larger part on Tesco.

Consider that the interest on 2 billion is 70,000,000, now consider that not only are them making 100 million plus, they are also the centre of data, a place Tesco will desperately need in the coming 2-5 years. Not having it could imply more costings for Tesco. No one seemed to be considering that part of the equation at all.

So, reality now, will stores be closed? That seems unavoidable, yet closing stores also means no more revenue, dumping the location at a loss and a few other items linked to this. Tesco needs to grow again, but the method remains debatable. I would have thought that moving more towards an Aldi/Lidl margin might make a difference, will it be enough? Whatever move it will make, it will need data to support and test the foundations with, so I personally feel that this requires the non-sale of Dunnhumby (for now). You see, I still see the centre with Dunnhumby for another reason. When you look at their site, you see a list of the large corporations, that is all good (and it brings home the bacon), but they are also sitting on loads of Tesco data as well. What if aggregated parts could be linked to small firms, smaller firms who end up with a dashboard solution, where their limited data is linked to that massive Tesco Data Warehouse, where these smaller companies, for a small fee get a dashboard uniting their data with Tesco demographics. Now we have a whole new clientele in a business setting, so before those supermarkets get closed, they should see if a small corner of it could be an added business venture. Likely those prospective clients will be in larger area’s where Tesco remains operational, but we now have an added service and Dunnhumby has an optional new suite (based on for example SAP dashboard) that opens up new ventures and even added consultancy and training. In these times the innovators will cause growth to evolve, selling off things only makes for lost market share (even though some non-profit ventures should always be considered for scrapping).

Are my ideas so outlandish? You must always consider that part, for the simple reason that the sceptical approach causes no harm and the proof that follows will only create futures. The following quote is as old as the hills, so it should not be a surprise to anyone in this field: “Sales will blame Marketing for the lack of quality leads with repetitive precision, whilst Marketing will blame Sales for not acting on the leads on time, or at all. When nobody has any reliable stats to back up their ‘verdict’, the arguments go on forever and nothing gets done”. Now, consider all these new firms, those new start-ups, or just one man companies like for example Electricians, Plumbers and Painters. They have no Sales or Marketing at all in most cases, would it not be nice if they had a simple dashboard based option that can help them focus on where possible opportunities lie? Not to mention usual retail like family bookshops and leagues of small pharmacy places that could do better. The solution I suggested could help them focus on where to look next. The great thing is that for the most, the same basic solution will work for all, they would only need a set of very specific filters in addition to the demographical ones. A solution that could be automated to the larger extent. One simple market, there for the taking. Did anyone consider that?

And as we look into these possibilities, we get back to the beginning, how could all the financial data be so opaque that it escaped the view of PwC, when we look at all these claims by experts, how did none of the warning lights light up, especially when we consider the words of Deloitte “these auditors ‘missed’ it for a longer period of time“, now I have brought you from the premise, past the innuendo to the basic view on how data can be new business too. Finally, when we consider the following quote that was in the Guardian “Further positives include that Tesco did in fact make a bigger trading profit than the market believed was possible (£1.4bn v. £760.86m consensus)“, this reads, they did twice as good, this means that Tesco is getting back on its feet. Yes, I did read that it is less than it was, but still, they got one dot four billion in, which is a lot better than Greece and most traders want them to get 7 billion regardless, so I think we should consider that many are willing to dump 7 billion on a location of non-cooperation, whilst they will drown a corporation fight to achieve and collect ACTUAL revenue. What a double standard we live by!

If we go by the simplest stats (not an accurate one), then we see that Tesco exceeded by £700M, which is 23% of the £3 billion loss, Greece cannot even raise 10% of what is due shortly, so it is time to look at what is real and look at why the press seems to be ‘avoiding’ (read not actively digging) into Pricewaterhouse Cooper either. But I will leave that to what I would currently regard to be the ‘Pussy’ family (Witherow, Rusbridger, Murdoch et al). Should you consider the path I walked here to be ‘inappropriate’ then Google ‘Tesco+scandal+2015‘ (837.000) and Google ‘PwC+scandal+2015‘ (271.000), now look at the amount of Newspaper links we find in the second one (almost none and many of these links are 2014). I think I made my case here, I just wonder what scared the press to this extent away from a story.

So as we see the quotes “Over the full year, the profit margin in the UK was 1.1%, a far cry from the impossible 5.2% that Lewis’s predecessor, Philip Clarke, ridiculously attempted to defend” and “Lewis must show that the ‘early encouraging signs from what we have done so far’ will produce a discernible improvement in profits“, yet no mention on the previous directors, regarding ‘cooking’ the books and still no mention of the Auditor either. It seems that everyone knows that the dice are loaded but no one is willing to say it out loud.

What else is not reported on regarding the 24:1 loss?

 

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