Mountains and molehills or not?26 Jun 2023 13:51
Very strange goings-on. It appears that not only is the delay only due to a transaction which occurred from 2013-2017, but that the outcome may actually be positive for BMS as it may result in the cancellation and release of a liability!
I suspect the share price reaction, though of course reflecting damage to trust, speculation on what's still to come out etc, is overdone as it relates to something so historic. Especially if - and at present that's a bif "if"! - the £3m is all that's involved. There may be a large bounce to come if so.
This doesn't reflect well on the previous CFO's ability and perhaps explains their departure.
I note that Paul Scott on St ockopedia agrees today and has written:
Extracts:
"Sky News (which seems to be the place to go for tip-offs of deals and scandals) reported yesterday that BMS “has been told by its auditor that its accounts will not be signed off before a deadline this week”, and is “plunged into crisis” by this, which would see its shares suspended. Although I would say that late accounts are quite commonplace these days, with the effects of the pandemic still being felt by understaffed auditors.
More worryingly, Sky says that auditors BDO are unhappy about unspecified elements of the accounts, and that FRP Advisory (a restructuring/insolvency/investigations) firm had been brought in. That sounds a lot more serious than just a slight delay to signing off the numbers.
Trading update – this all sounds fine, no changes apparently, and 33% increased divi (yield is a useful 4.3%)....
...Accounts investigation – this doesn’t look material, at c.$3m, and is historic from 2013-17.
It confirms Sky’s report that FRP Advisory to assist the investigation (that won’t come cheap).....
The accounting problems seem odd considering they’re historic, and only $3m. Why get in expensive advisers, and suspend the shares, over an issue that is small? I wonder if fraud might be involved? (EDIT: this point is also mentioned by M48 in the comments below. I should emphasise we’re only speculating here, not making any accusations).
Shareholders have this week to decide whether to bail out ahead of temporary suspension, or to sit tight (and maybe even buy more, if it plunges). Based on what we’ve been told so far, this issue doesn’t look significant or material, so personally I’d be inclined to ignore it. But as always in this type of situation, we never know what else might come out of the woodwork. Overall though, Braemar looks a good, sound business, so I’d be inclined to give it the benefit of the doubt over a small, historic accounting problem."
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