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Provide evidence to disprove my hypotheses. Genuinely could not give a f@ck what you think.
What if the 20% provision wasn't enough? What if the business has had to pay back commissions way in excess of that after many contracts failed to actually get live, many more suffered a change of ownership, more under consumed after being inflated by 'the guys who built the business' to earn mega commissions, let lone those refunded to avoid claims against the company. What kind of cash outflow would we be talking? Monumental.
What kind of cash outflow have we seen in dividends over the years since IPO on essentially a non profit making racket?
Wouldn't that be classed as reckless accounting and poor business practice, or just incompetence /negligence? It's one of them.
Maybe we should be looking at why the previous auditor delayed the results - what were they trying to protect?
Want a pointer to the truth? - Check the new rev rec policy of 65% and the massive reclaims by a supplier announced in 2017.
Oh, I'm afraid there are 'legacy' issues
As for the 'high margin services' I agree with peaky. They were just used to justify massive uplifts on contracts which drove failure of contracts to start, change of ownership (I bet businesses have gone out of business!) and were attractive to other brokers to exploit poor industry control, led to complaints etc.. Those services were never delivered and hence had no cost. That's the 'high margin'
Does anyone else see the self fulfilling nature of this flawed business model that was only sustained by doing more of the same? Wouldnt have been so bad if cash and rev rec were monthly as an when contracts were up an running, but then IPO would have been smaller. Much smaller
There are plenty of people still not grasping the fundamental issue that has put UTW into this position, and may well put it out of business.
Thompson and crew opted for (and drove energy suppliers towards) an aggressive policy of taking most of the commission value of a contract upfront as cash. They then had terms with those energy suppliers that meant that a 'true-up' wouldn't happen until the end of that contract. They then drove 4-5 year contracts as a way to maximise cash inflows, and kicked the can down the road for the true-up. That was OK for a period of time, as new business well outweighed any negative true -ups, but eventually it has caught up with them - or more appropriately with the new team.Talking to some in the industry this past few weeks it was well known that this was a ticking time bomb waiting to explode - which it duly has - and that is why many in the industry are very happy to see this happen.
The energy suppliers have themselves to blame, but are contractually able to reclaim overpaid commissions which is exactly what happened in 2017 to the tune of £7m+ for contracts written in prior years with just one supplier. I can't see how the current management team could have avoided this. In fact they have done what they are obliged to do and announce all of this and have spent time trying to put in controls to prevent this happening in the future which has impacted sales, and I guess profitability as the previous model was based on hundreds and hundreds of expensive people outbound calling. The previous management team were either complicit in this, or utterly inept IMHO. It is my bet that there are all sorts of true-up nightmares happening every month for past contracts, and THAT is why we are seeing them struggle.
I cant believe some of the people here are heralding Norther Gas and Power and Utility Alliance. They have the same model, and lots of the same people (used to work at UTW). What makes anyone think the same wont happen to them a couple of years down the track? One difference is that they are not public. Additionally, the expansion into new countries is IMO quite clever - New markets to exploit in the same way and generate cash required to deal with reclaims when they come.
Thompson IMO knew exactly what was going on (or if he didn't he was inept), and when the new team came in and understood they ejected him. His massive ego wouldn't let him sit back and enjoy the spoils however, so he set up a company to try and exploit misdeeds in the industry (which tells me he knew what was going on), AND ditched his shares in UTW to cause max damage (as someone else has said), to get back at the management team who kicked him out.
Came across this interesting article in my research
https://luxe-magazine.co.uk/2018/11/luxe-life-geoff-thompson/
The man himself. Read the last line. What a guy. What a joke
What?! An auditor would impose a policy in which more revenue was recognised than the upfront cash the company received for those contracts (which in itself is risky) - come off it! that's just plain ridiculous!
IFRS15 simply changed the accounting policy to something more sensible, stopping practices like that.
Its clear the consumption levels are way below what was expected, further proving that this high risk strategy was utterly flawed (see post by others) and masked only by writing more and more poor business. Perhaps they weren't as expert in the industry as they made out, fundamentally not understanding that businesses would invest in efficiency & reduce usage over time, and hence (some may say) incompetent, as STILL they went after this frankly absurd revenue recognition policy to inflate the SP & failed to put in the controls they (and you) say are now there. Either that or they DID understand, and the implication is something quite different. I wont offer my opinion here for fear of being silenced.
I'm still with you on the value of the base book however. If this business is profit making, and if its customers are genuinely there, then the current SP WAY undervalues this. Surely someone will come in post results and snap this up. As much as I've lost, I'm actually considering putting more in. Even if it were taken private, the SP offer would be above what it is now.
Interesting on the services offered in the Management Plan. Why would they abandon them if they could help differentiate and drive margin? Would seem a very poor move on the face of it
My account was suspended for potentially libellous posts, and my posts (some of them) were deleted. Looks like I irked someone by posting enough truth for it to hurt.
I made the mistake of implying mis-selling in the past at UTW. I will state for the record I retract that.; what i meant to express (but chose words poorly however) is the fact that commissions were overpaid for inflated contracts written in the period the previous CEO was in charge, and were clawed back by one angry supplier in 2017. I doubt that is only issue UTW are facing of this sort, but just the only one that has been announced. My bet is that the new team walked into a nightmare and have been unable to get out of it as its still going on. They wont have the resources to invest in growth.
The reason we are entitled to express an opinion ProudNElad is because people like kevver and me have invested heavily into a business that has IMO deceived its shareholders with overly aggressive accounting and a valuation based on inflated contract values. People can draw their own conclusion about who knew what was going on.
No-one is crucifying the defenceless, we’re merely pointing out the infuriating fact that the ex CEO has not had to answer for this, and instead ditches his remaining shares (having had millions lets not forget) in one go dragging the SP still lower, (which is his prerogative of course) but then has the audacity to be supporting a new company that looks like its attacking the old one.
Lastly Energy Audits are ten a penny, and not differentiation. They are offered by every tom dick and harry broker to 'justify' broker fees - is this what you mean by protecting margin?? I don't know what wise life is, but if its another audit type service the same point applies.
I do agree with you however that the current base and renewal potential has real value, but Handofjohnson makes a good point about the market being vastly different now so those renewals will be harder to do, and customers are much much wiser, and are sick of having been called relentlessly for years.
In sum, and IMO the previous team got lucky with market timing & no competition, but got greedy and inflated the books selling us a beautiful story that was rotten inside. The new team bought the same as we did and unless they can make it work wont last as someone will see value taking the base off their hands.
For what its worth I agree with Moneyspider in watching the debt level. I think there are more issues here to come. If commissions have been repaid in the millions that have been announced, there will be a range of smaller repayments happening unnannounced, crippling the cashflow. I'd be intrigued to learn what these contracts written in the past actually have been worth vs the 'revenue' recognised in the past. Someone has some explaining to do
I agree peaky. Commissions were paid upfront on inflated estimated contract values / usage assumptions, and only trued up at the end of the contract period - which if contracts were for 4 or 5 years, is a long time to wait and a nightmare in waiting. (I said this in a previous post, but it seems to have been deleted by someone?). One supplier reclaimed overpaid commission in one go last year (see RNS mid 2017), presumably having lost patience. Easy to see now that there will be money going out as fast as its coming in, (which itself will be more difficult if commission terms have changed and suppliers have indeed cottoned-on), They (utw) also say they've improved internal controls - I assume meaning that customers are no longer ripped off by those dodgy sales people you mention below.
The real questions still remain. First how many overinflated contracts still remain, and second when were they written? My bet is that the majority of these contracts were written 2013-16 just around IPO and after. In short, we've all been had by those long gone.
The old management team must have known what was going on, what was coming and when to get out, and its why they all left. I actually pity the new board who have to deal with this. The previous CFO left to set up a competitor (who by the looks of it are a decent outfit, despite the questionable morality, he must have grown a conscience). Looks like Thompson however is behind a PPI type outfit advising businesses how to reclaim mis-sold energy contracts. The hypocrisy is staggering. Not content with earning millions from exaggerating contracts as a broker, he's pushing a share of savings model on helping businesses break those same contracts.
i'm going to keep digging. Not having my post deleted like that.
Peaky, you really are misinformed.
How are UTW not independent? As far as I know they work with lots of energy suppliers, and Towergate the partner in Insurance offer products from Axa, Allianz, Zurich, RSA etc...and Love Energy Savings and Make It Cheaper who operate in b2b space certainly dont spend £150m on advertising. I agree with JohnnyCah - From small acorns etc... I can only surmise that from the level of bitterness you are one of 'Slippery Geoff's' pals, hellbent on destroying shareholder value, desperately trying to divert from the fact that past growth was overinflated hype driven by levels of greed and delusion seldom seen, and that the current team seen to have been left holding the proverbial baby. (ref overpaid commissions, write downs etc). Try some positivity sunshine.
So your answer is to stick to outbound calling that no-one wants. Certified genius. Class A thinking. Who cares what advertising you spend if you turn a profit?
errr, Make It Cheaper, Go Compare, Moneysupermarket, Compare the Market etc...
Why do customers go there?
"Wouldn’t surprise me if the Thompson family made a bid and took it back into private ownership."
And what would that clown do with it? He could have himself a nice set of customers for Business Energy Claims to go after i suppose...
@troo - cat got your tongue?
"Wouldn’t surprise me if the Thompson family made a bid and took it back into private ownership."
And what would that clown do with it? He could have himself a nice set of customers for Business Energy Claims to go after i suppose...
@troo - cat got your tongue?
"Wouldn’t surprise me if the Thompson family made a bid and took it back into private ownership."
And what would that clown do with it? He could have himself a nice set of customers for Business Energy Claims to go after i suppose...
@troo - cat got your tongue?
troo: aren't you the ex CFO who bailed after IPO with millions and set up a competitor to UTW after presiding over this mess of dodgy rev rec & inflated contract values you signed off on to boost share price? Now you have the audacity to snipe from the sidelines while we shareholders suffer? https://beta.companieshouse.gov.uk/company/10293408 . Shame on you.