A Christmas Parable and Productivity

No this is not an examination of how Santa Claus gets around the whole world in one night. But as my last post before Christmas, let me explain how I have automated the sending of Christmas cards over the last thirty years. I am by nature a lazy person, so handwriting and addressing the family’s Christmas cards was a task I chose to tackle with some automation many years ago. The first step was to put friends, family and business contacts into a contact management software product. This enabled me to reuse the same list every year, maintain it with changes easily, and once per year print self-adhesive mailing labels. More latterly I have used an email delivery service to distribute many of my Xmas “cards” electronically which included short newsletters in some years. Only a few cards now get posted to the favoured few or those not on email, thus saving postage costs.

So productivity before Christmas in terms of use of my time has improved enormously, and I can now send out hundreds of “cards” for less expense than the tens sent previously.

The Government is very concerned about the poor productivity of the economy in the UK. It has not been improving, and hence wages are unlikely to rise. The above parable shows it is necessary to do three key things to improve productivity: 1) Invest in new technology (in the above case, several software products); 2) adopt new ways of doing things (i.e. there needs to be cultural changes) and 3) invest time in learning how to use the new technology (education).

Obviously in business terms, such investment tends not to take place when labour is cheap or free (the equivalent of asking your spouse to hand address the cards). But even then there are still benefits from automation such as reducing postage costs, and reducing the environmentally damaging costs of transporting millions of cards around the country.

There was an interesting letter in the Financial Times recently from Andrew Smithers. He said “In the real world investment decisions are made in the interests of management [not of shareholders as in the classic economic model]. As a result of the change in the way managements are paid (that is the bonus culture) they are encouraged to prefer buy-backs to investment. This is the root cause of poor productivity.”

That is indeed one of the key problems. Typical bonus schemes such as LTIPs pay out based on earnings per share which are enhanced by share buy-backs. Just a few years ago for a company to buy its own shares was illegal. Perhaps we should revert to that situation? Alternatively outlaw such bonus schemes.

Another reason why productivity is not improving is that the incentives for the chief executives of public companies to invest for the long term is minimal. Their length of tenure before they retire or move to another company is so short that they would be mad to take risks in adopting new techniques or changing business processes. Indeed their pay is now so high that they don’t need to stick around for more than a few years before they have made enough money to feel secure in a comfortable retirement.

These are the issues the Government needs to tackle if UK productivity is to improve.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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South African Politics, Pan African Resources and Mondi

The election of Cyril Ramaphosa as the President of the ANC suggests that the country may be taking a positive step forwards. Under Jacob Zuma South Africa has become riddled with corruption and “state capture” where assets are sold off to favoured parties. Whether Cyril Ramaphosa can become President of the country in due course remains to be seen but it is worth looking at his background.

He has a legal qualification and became a trade union activist. After being active in politics, including helping to develop the “Black Economic Empowerment” policy that affects any company operating in the country, he became a businessman. Indeed he was for a time Chairman of gold miner Pan African Resources (PAF) which I held shares in for a while. This is a company registered in the UK and they hold their AGMs in London, although I don’t recall Mr Ramaphosa ever turning up for one. But with this and his other business interests he should have learned something about business to offset his left-wing sympathies.

There are of course other businesses operating in South Africa that are registered in the UK and the risk of political interference is always at the back of investors minds. One I currently hold is Mondi which is actually dual-listed on both the London and Johannesburg stock exchanges. This means it is subject to regulation in both the UK and South Africa (the South African financial regulations are actually very good), but one disadvantage is that a withholding tax is payable on dividends. It holds its AGMs in London.

Mondi (MNDI) is a paper and packaging producer with interests in many countries. Its share price does seem to be affected to some extent by political events in South Africa and one gets the impression that the valuation if slightly lower than other packaging companies for that reason (e.g. a somewhat lower prospective p/e than D.S. Smith). Goldman Sachs recently upgraded Mondi to a “buy” with a 2200 price target.

So apart from wishing Mr Ramaphosa well, investors do need to take into account the political risks of investing in South Africa. But my experience has been positive to date with the ANC seeming to take care not to damage large businesses overtly. However, the general economic trends in South Africa under Zuma have not been good even though the per capita wealth of the country at $11,300 is still the highest in Africa (excepting Mauritius).

A sound economy, rational economic policies and the rule of law are the key to generating wealth. Compare the wealth of South Africans with that of Zimbabwe where it is estimated to be as little as $200!

Perhaps the moral is that politics does matter!

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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LSE General Meeting and Blancco AGM

Yesterday I attended two company general meetings (I hold a trivial number of shares in each). Here’s a brief report on events, with the later one being more interesting than the first one.

London Stock Exchange (LSE) General Meeting.

As readers may be aware, a General Meeting was called at the LSE by The Children’s Master Investor Fund (TCF), which is led by Sir Christopher Hohn, in an attempt to remove the Chairman Donald Brydon. That was the only item on the agenda. This arose from a dispute over the removal of CEO Xavier Rolet after the board decided to do some “succession planning”. Mr Rolet has been a very successful leader of the LSE for eight years (the share price has gone up more than 6 times since he was appointed to the board in 2009).

Mr Rolet was going to depart after the Deutsche Borse merger but when that fell through the board apparently decided that he should be replaced. Sir Christopher Hohn objected to him being eased out. There then appeared a number of press reports (e.g. in the FT) suggesting that Mr Rolet was a difficult person to work with – rude to colleagues, tended to not pay attention in meetings, and other defamatory remarks. The company’s defence document for the meeting referred to Mr Rolet’s “operating style” as an important factor in seeking a replacement.

The meeting was attended by mainly “suits”, with very few private shareholders as is more common at these kinds of events – only the latter asked any questions. Neither Mr Rolet or Mr Hohn attended but the latter certainly had representatives present.

The meeting was chaired by the Senior Independent Director, Paul Heiden, and the acting CEO Donald Warran also spoke. Mr Brydon said little. Mr Warren emphasised the need for a “team” to deliver business success and made positive comments about the prospects for the company.

One shareholder commented that it was a “sorry affair” that had generated considerable opprobrium against the company.

The vote was taken on a poll, with results announced some time later. The votes were 79% opposed to the resolution to remove the Chairman (i.e. 21% supportive although there were also 9 million votes Withheld). Sir Christopher Hohn suggested afterwards that this shows considerable support for a change of Chairman and that the board should look to do that sooner rather than later.

Comment: I agree with the views expressed by one shareholder in the meeting. This seems to have been handled badly. Succession planning for non-executive directors who have reached ten years’ service are routine. But when you decide to remove an executive director you have to tread a lot more carefully. This resulted in a public battle, and then having to pay off Mr Rolet with a very generous compensation package.

The allegations about Mr Rolet’s management style may or may not be true. But forceful personalities are very common in high achieving leaders (Steve Jobs and Bill Gates are two very good examples). Organisations are wisest to put up with such personalities in my experience. Having heard what was said at the meeting, I voted in favour of removing Mr Brydon as Chairman. 

Blancco (BLTG) Annual General Meeting

Blannco is an AIM listed software company that specialises in data erasure and mobile phone diagnostics. It transmogrified from a business named Regenersis which was into hardware repair and there were changes of management and restructuring when that happened.

The meeting was chaired by Rob Woodward with about a dozen, mainly disgruntled, private shareholders present.

The reason for their unhappiness is no doubt the substantial losses reported in the last three years (£4.3 million in the year ending June 2017) compounded by the need to restate the 2016 accounts following the discovery by a new interim CFO that sales worth £3.5 million booked in June and December 2016 were uncollectable. The company had to raise additional funds as a result at that time. The former CEO, Patrick Clawson, departed and the interim CFO is now interim CEO. They are looking for a new permanent CEO.

Mr Woodward opened the meeting by introducing the board and said “last year was a year of substantial challenge”. He summarised the events mentioned above and said “several members of the senior management team had departed”. He suggested the company needed to rebuild trust with all stakeholders, but the market opportunity remains strong. He said he was unable to comment on some of the investigations undertaken into past events for legal reasons.

Shareholders asked questions about current revenue recognition policies. Then the question of who might be accountable arose, e.g. the auditors for failing to spot the abuse or the former CEO. But Mr Woodward said the board did not believe it was in anyone’s interests to take action against individuals.

Note: the auditor at the time was KPMG but they were replaced by PWC at this meeting. Past events were not given as a reason but open tenders following length of service and other platitudes. Mr Woodward stated the auditors correctly prepared the accounts based on management information provided and that the management overrode controls. The company had taken legal advice but were unwilling to disclose it.

I asked whether there had been any report to the FRC asking them to investigate the audit. Apparently not.

A vote on the resolutions was taken on a show of hands. All resolutions passed with 100% voting For in several cases. But there were over 11 million votes Withheld on some of the resolutions. I asked who that might be as clearly some institution was unhappy. Although the Chairman declined to say, a shareholder pointed out that the number matched the holding of M&G/Prudential (see page 29 of the Annual Report).

Simon Herrick, acting CEO, gave us some information on his background (he had recently helped to float Ramsdens, a financial services company). He said Blancco had a great position in the market. Data erasure will be a big market but it is really only just beginning to kick off. The company seemed to have been rationalising its operations by introducing Salesforce everywhere and a new accounting system (NetSuite). He said the company did not need more cash in the short term but they are not generating large amounts either. He suggested shareholders study the last results presentation on their web site where cash flow is analysed (page 14).

Apparently the company is well down the process of finding a new CEO with a software background, strong leadership capabilities and who can grow the business. They are focusing on a US background which is their major market at present and where such people are easier to find. (Comment: but they are also expensive).

Note it is remarkable that this company only has one person on the board with any software industry experience. To my mind this is a major defect.

Concluding Comments: This problem of revenue recognition at software and other IT companies persists, with auditors apparently incapable of identifying the signs. The rules in the accounting standards have been tightened up, but the activities of over enthusiastic management keen to achieve their bonuses or even ramp up the share price persists. This is in reality a fraud on the company and on their investors.

Why auditors are still proving incapable of spotting such frauds is probably because they are not sceptical enough about the information they are given. But they are not that difficult to identify. Large deals done near financial year ends, where the cash is not yet collected or the agreed payment terms are very extended should be examined very closely.

Not that these are foolproof. As we are coming up to the year end, I recall the case of Software International some years ago who got their sales staff to book sales to customers near the year end which were then invoiced. The customers were told they should simply cancel them in the new year. They employed very persuasive female sales staff who begged the customers to help with their bonus entitlements. The company collapsed when this process was discovered.

But there are way too many of these problems still arising, e.g. HP/Autonomy, Globo (both audits still under investigation), and more recently IDOX. Readers can probably suggest others.

As regards the prospects for Blancco, there is certainly a market opportunity but whether it can be exploited profitably remains to be seen. They really do need a good new CEO but they are not easy to hire. In the meantime, the events in the last couple of years must have been somewhat demoralising for the company staff. If I worked for this business, I am not sure that I would have great confidence in the current board. These kinds of businesses need visionary leaders who can promote the merits of the new technology enthusiastically and who have a very strong technology background.

With profits somewhat uncertain, but on a revenue multiple of 1.5 times, the uncertainty is probably reflected in the current share price.

Postscript: Feel sorry for KPMG losing the audit of Blancco? You don’t need to. The average pay of partners in the UK at the firm last year was £519,000 and according to the last annual report there were 623 UK partners. But those at PWC, EY and Deloittes did even better (the latter on £865,000).

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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ADVFN AGM – How to Disenfranchise Shareholders, and OFCOM Interest

I was surprised yesterday to pick up an RNS Announcement from ADVFN Plc (AFN) stating that the company’s Annual General Meeting had taken place on that day and all resolutions were duly passed. I was surprised because as a shareholder in the company (and on the register), I had received no notification of the AGM and no proxy voting form either of course.

In addition there is no notice of the AGM given in any RNS announcement, and there is no information on it on the company’s web site. It’s an easy way to avoid folks from voting or turning up at the AGM – you simply don’t tell anyone about it!

Now admittedly I don’t hold many shares. I only bought a few in early 2017 because ADVFN were peripherally involved in a libel suit I was pursing (settled in the High Court on Thursday to my satisfaction – more on that another time). I thought it would be helpful to attend any General Meetings of the company to learn more about the business.

This might be one of my best investments in 2017. Share price when purchased was 27.4p, share price now is 39.5p (i.e. up 44%). But the price did fall 9% yesterday, so perhaps other folks did attend the AGM and asked some awkward questions. If any readers of this blog did so, a report on the meeting would be helpful.

ADVFN run investment information platforms including a popular bulletin board. Profits have been non-existent for most of the last few years, but revenue was £8.2 million last year so the current market cap of £10.5 million is not totally bonkers. The company also indicated it was now focusing on profits rather than growth so results might improve – or at least they might not run out of cash and need to do more fund raising although the picture is not totally clear. One reason for the share price rise was probably the announcement by the company of a cryptocurrency project, using blockchain technology. The application is for a digital wallet to support a social media cryptocurrency. Although it is not altogether apparent who might use that and what the benefits might be, it appears to possibly be a way to support micropayment services for blog contributions. Any company that can claim involvement in the blockchain/cryptocurrency world gets their share price inflated it seems. It’s another “bubble” just like the Bitcoin price.

There has been a lot of public debate about the problem of “fake news” on social media and the failure to remove abusive content or more generally censor irresponsible stories. Financial bulletin boards and blogs are one part of this world of dubious content often posted by anonymous contributors who frequently get their facts wrong. And sometimes possibly deliberately so.

One interesting comment last week was from the Chairman of OFCOM, the media regulator. Patricia Hodgson said internet businesses such as Google and Facebook are “publishers” and not simply “platforms”. In other words, they might be responsible for their content after all. Ofcom are considering the issues although she indicated it was for Government to decide on any action in this area and OFCOM probably do not have the resources at present to cover it. But businesses such as ADVFN might find they are caught up with any general media regulation even though they have so far avoided interference from financial regulators such as the FCA – why that is so I have never understood.

Freedom of the press is a meritorious policy, but the internet has introduced numerous problems such as “trolls” who abuse folks in public often for dubious motives. Politicians are frequently attacked now (death threats are common for example) so we might see some action from them once the politics of Brexit are out of the way.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Persimmon Directors, IDOX Profit Warning and Transplants

This morning house building company Persimmon announced that Chairman Nicholas Wrigley and Non-Exec Director Jonathan Davie were departing. The company says that both of them recognise that the 2012 LTIP “could have included a cap” and “in recognition of this omission” they have tendered their resignations.

Holders of Persimmon shares like me, or indeed anyone who has followed the debate on excessive executive pay, will be aware of the outrageous pay that has resulted at this and other companies because of the adoption of complex and aggressive LTIPs. Often these schemes have paid out unanticipated amounts, because the directors seemed not to understand their complexities or the possible outcomes. In the case of Persimmon it has meant that as much as 10 per cent of the value of the company has been paid out to the beneficiaries, allowing the CEO to pocket more than £100 million.

Neither of course did the shareholders understand these schemes and hence voted in favour of them regularly. So long as the company financial performance was good, some shareholders considered the payouts were justified. So the Board of Persimmon “believes that the introduction of the 2012 LTIP has been a significant factor in the Company’s outstanding performance over this period, led by a strong and talented executive team”. No mention of the main factors that have driven performance – high house prices supported by interest rates lower than they have been for thousands of years, the rapid growth in households from immigration and other factors, the Governments “help to buy scheme”, and other contributors. When companies are making hay, few shareholders will pay much attention to remuneration schemes or vote against them which is surely an argument for Government intervention in this area.

The company has appointed a new Chairman of the Remuneration Committee, who is Marion Sears. Will policies and practices change as a result? I doubt it because back in 2015 I argued with her at the AGM of Dunelm where she chaired the Remuneration Committee and subsequently exchanged emails on the complexities of the bonus scheme at that company. I also said to her that it was “difficult to understand the implications of the new policy on the overall remuneration of the senior executives and its sensitivity to different scenarios” and argued that the performance targets were not stretching.

I have come to the conclusion that all traditional LTIP schemes are dysfunctional and I therefore vote against them. There are better ways of recognising superior management performance.

IDOX

Another company I have held for a long time is AIM listed software company IDOX. This company was very successful under the leadership of former CEO Richard Kellett-Clarke. Two days ago the company issued a profit warning (not the first) saying that results for the year ending October 2017 will be delayed until next February. The announcement indicated some concerns about revenue recognition, complicated by the “sudden absence” of the CEO, Andrew Riley, on sick leave.

This is the kind of announcement that investors hate. No real details, and no information on when or if Andrew Riley might return. All we know is that the EBITDA forecast is reduced again to approximately £20 million. But at least we know that Kellett-Clarke is back as interim CEO.

There were concerns expressed by me at the last IDOX AGM about revenue recognition, high debtors and the apparent offering of long payment terms to customers (effectively providing them credit). I opined at the time that this was no way to run a software company because even if the customers are credit worthy, projects can run into unforeseen difficulties causing the customers to argue about the bills. I reduced my holding in the company substantially at the time as a result although it’s still one of my bigger holdings. Leon Boros also made negative comments about cash flows at the company and some investors were shorting the stock at the time – they are probably doing so again.

Comments on bulletin boards also raise the issue about the restating of accounts at 6PM, an acquisition that IDOX made in December 2016. But this is old news. Reference to accounting restatements at 6PM were made in the offer document (page 15, where it says for example that “the Directors expect that the value of the net assets of 6PM under IDOX accounting policies will be reduced materially”). Indeed 6PM subsequently filed accounts in Malta where they are registered showing substantial losses in 2016 and restating the 2015 and 2014 numbers. I thought the acquisition was a dubious one at the time for various reasons and voted against it. But these adjustments were surely known about earlier in the year so the latest announcement suggests some other problems.

Needless to say, with all these uncertainties and lack of clarification from the company (which we may not get until February it seems), all the likely share buyers have disappeared because it becomes very difficult to value the business. Simply too many unknowns. I will be encouraging the company to clarify the position a.s.a.p., but the “transplant” of the CEO, even on a temporary basis, might provide some reassurance that the problems will be sorted.

On the subject of transplants, one public consultation that is of personal interest to me is the Government’s consideration to change the default on organ donation to be an “opt-out” system as opposed to the current “opt-in” arrangement. In other words, unless you had specifically opted out, then it would be assumed that you had no objection to your organs being used for transplantation. Relatives may still be consulted though.

It is hoped that this will increase the number of transplants that are performed. There are a large number of kidney transplants performed each year, with lesser numbers of liver, pancreas, lung and heart transplants. The NHS says that 50,000 people are alive today who would not otherwise be so as a result (including me of course). But there are still long queues of people awaiting transplants. In the case of kidney patients, the alternative of dialysis reduces quality of life substantially and also reduces life expectancy significantly so it is a very poor alternative. Dialysis just keeps you alive, but a transplant gives you a new and better future.

For my financially informed readers, you also need to bear in mind that transplants save the NHS money because maintaining a kidney transplant patient costs a lot less than looking after dialysis patients.

Scotland, Wales and other countries have introduced opt-out systems already. Go here to respond to the public consultation on the matter: https://www.gov.uk/government/consultations/introducing-opt-out-consent-for-organ-and-tissue-donation-in-england

I hope readers will support this change to the law.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Stale Directors and the UK Corporate Governance Code

One interesting fact highlighted by the Financial Times today was the impact of the proposed new UK Corporate Governance Code on company Chairmen. It pointed out that the change in the Code to limit the length of service of directors will include their time as Chairmen and will mean dozens of long-standing Chairmen may need to retire.

The FT suggests 67 of FTSE-100 chairmen will be affected, and there will be another 48 chairmen of FTSE-250 companies according to an analysis by the FT and Manifest. The reason for the 9-year rule for non-executive directors is simply because they cannot be considered “independent” after that length of time.

One aspect that the FT did not mention was the prevalence of such long-standing chairmen on the boards of investment trusts. Without doing a formal check, I found two in my holdings very easily. Anthony Townsend who actually “rejoined” the board of Finsbury Growth & Income in 2005 and John Scott who was on the board of Scottish Mortgage for 16 years until he retired in June. Investment Trusts seem to exhibit this symptom of permitting investment world grandees to serve for many years both as chairman and ordinary non-executive directors quite often. This has been condoned by the AIC (a trade body for investment companies) who seem to believe that length of service is no handicap. They have even suggested that such companies are not bound by the UK Corporate Governance Code in this area in the past. Will they try to take the same stance on this issue one wonders?

Will this change in the Code, if adopted, lead to a loss of highly experienced directors to the disadvantage of investors? Not likely. I suggest it will just result in a game of musical chairs where they simply move to another company when the clock would be reset. But it might at least give a hint to those too long in service to consider retirement.

It is surely a positive change as I have seen too many directors hang around for too long. They may not show actual signs of dementia (although one of the Chairmen of one my holdings did before retiring), but they are not always as sharp as they could be. Regrettably the generally aged shareholders who turn up at the AGMs of companies are averse to voting against such directors even when the issue is raised. So perhaps the boards affected by this problem of the Code change might simply choose to ignore it on a “comply or explain” excuse – I can volunteer the words they could use because I see them regularly. But that would be a pity.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Brexit, HBOS, Globo and the FRC

Is it not heartening that the Brexit divorce bill, and other terms, have been settled? The exact cost is unclear but it could be up to £40 billion – a lot of money you may say! However, the fact that the key negotiators, Mrs May, Barnier et al, all looked somewhat glum about the deal when announced perhaps tells us that it was a compromise in which both sides had to concede ground. Or perhaps they were just tired. The terms of any future arrangements including trade deals still need to be worked out so it’s a long way from being concluded.

Now that £40 billion figure, sounds a lot, even if it is spread over some years. Hard line brexiteers will be unhappy. But it’s all relative. For example the annual UK Defence Budget is over £35 billion and rising. In addition, I have just read the Financial Reporting Council’s report on the HBOS audit and you can see there on page 7 that HBOS had to write off £63.3 billion in loan losses. That was only one smaller sized UK bank. According to the Bank of England, the financial crisis that affected HBOS caused £7.3 trillion of losses in total in the UK.

The report from the Financial Reporting Council (FRC) on the audit of HBOS is a quite tedious and turgid document. To remind you, HBOS was a bank that almost went bust after making imprudent commercial property loans financed by short term debt. When Lehman’s collapsed and debt became difficult to raise, HBOS had to be supported by the Government and then bailed out by a merger with Lloyds TSB. The latter’s shareholders are currently pursuing a claim against the company and its directors over that event.

The reason the audit of HBOS was examined by the FRC was because the company obtained an unqualified audit report suggesting that it was a “going concern” when it soon turned out to be otherwise. These events date back to 2008 – that’s 9 years ago which shows the speed with which the FRC typically operates.

One interesting comment made in the FRC report is that it suggests on page 11 that liquidity support from central banks may be considered “a normal funding source…..and therefore reliance on such support does not mean that the bank is not a going concern…..”. As banks with a positive balance sheet are usually assumed to be eligible for “lending of last resort” from the Bank of England that might mean that HBOS would be considered to be a going concern even if it ran out of cash (which is the reason most banks go bust, not because of defective balance sheets – Northern Rock is a good example).

The report also refers on page 29 to “market expectations” at the time. Market participants did not expect the financial crisis to get worse which affected the auditor’s views. So now we know why the FRC let the auditors of HBOS (KPMG) off the hook!

As I mentioned in a blog post a couple of weeks ago (see https://roliscon.blog/2017/11/22/standard-life-uk-smaller-companies-and-frc-meetings/ ), I attended a meeting with the FRC organised by ShareSoc/UKSA. One of the issues raised was the lack of feedback from the FRC on the progress of investigations. I followed up with one of the speakers after the meeting, specifically about the case of Globo. I asked what was the status on the investigation of the audit of their accounts by Grant Thornton. As readers may know, Globo was a company that went into administration in 2015 after it was revealed that the revenue of the company was probably fictitious (see https://www.sharesoc.org/campaigns/globo/ for details). The report of the administrators made it clear that the cash on the balance sheet of Globo plc seemed to have disappeared, bringing into doubt the preceding audit report on that ground alone let alone the revenue recognition issue.

The FRC announced an investigation in December 2015, i.e. two years ago. What have the FRC been doing, when will the investigation likely conclude, are there any preliminary conclusions, etc, etc? All of these questions are very relevant as the answers might provide the basis for legal action by shareholders against the auditors and others. After several email exchanges with FRC staff, the only answer I managed to elicit is that the investigation is on-going. It has not even been turned into a “Formal Complaint”.

The reason more information could not be supplied is that it might prejudice “the overarching requirement for fairness”. My response was “I really do suggest that the FRC needs to reconsider its policies in this area. You have too much emphasis on treating those who have been complained about (i.e. auditors) fairly, while those who have complained are treated unfairly. This rather suggests, as we already knew, that the FRC is dominated by auditors who are the people it is supposed to be regulating”.

You will be amused to read in the FRC’s Publication Policy document (para. 3) that “Transparency contributes to public confidence in independent disciplinary arrangements….” but then proceeds to spell out all the restrictions it imposes that thwart it.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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