Tag Archives: EY

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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