RE: Optimism23 Feb 2020 18:29
My comments on fishbones assertions.
1...Confusion over shareholdings and consequences...
This will have negligible consequences for financial performance because all such discussions / confusion/regulatory attention etc. all take place in the 'cloud' far away from the ground where all business transactions and performance take place..
I would further assert that this wrangling at a sharehder level is a 'perverse benefit' to the current board and senior management , now that the culprits and their footsoldiers have been removed...my experience as an FD is that you run a successful business in spite of sharehders interference rather than because of it , so let them fight it out amongst themselves , and allow directors and senior management to run the business themselves , which based on the previous 5 years accounts, they have been doing very well..
2...Work seemingly over valued....this is a possibility and is born out by the seemingly high debtors figure which equates to 90 days worth of sales, which it has to be said are quite high, they are, however, not unusual for the Gulf States where there tends to be a cultural norm of late payment of invoices..
3...Inflated assets and cash balances...assets values and cash balances are inversely related...if you have paid more for your assets than you should have , then you will have less cash left over..so how can cash be overstated , .besides cash varies on a daily basis by as much as $1 million so you can't assert anything whatsoever from the levels of cash reported .
4...Zero corporate governance ...repeat of point 1
5...FCA intervention ...repeat of point 1
6...Frantic selling/margin calls... This has everything to do with banks selling shares held as collateral to repay personal debts of the removed directors ..this is normal business practice...as soon as a bank thinks it is in danger of not having its loans repaid , it will sell all collateralised assets to reduce the bank's potential loss ..if they get less for these collateralised assets, than the outstanding balance on the loan then they will simply chase Shetty et Al for the reduced remainder of the loan ..which is what is happening ; hence, the current arguments over share ownership to meet their own personal debts.. I don't think it has anything to do with control of the business..
My concern remains over the amount of corporate debts and their ability to refinance/ roll over their existing loans and enter into new ones to fund future growth...this is where the current shenanigans might have an effect...
The final point which Banana didn't mention was M.W's assertion that it wasn't declaring ALL balance sheet debt ...this refers to lease liabilities which are classified as debt ..this isn't really debt as such because it is matched off against 'right of use assets' shown under fixed assets....IFRS requirements now require both the cumulative cost of renting these assets which are the lease liabilities, with an equiva
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