Alfred Mcalpine Share Discussion Threads

[spitfire3] 26/2/2007 18:32

i can guess the no personal gain reason....managers and employees are told to sell more and more there threatned with losing there jobs etc etc, so they pretend to sell and make up fictitious orders... the books look ok until a audit is done...a book keeper is that a bookeeper adding figures in front of him....a loss prevention officer looks into wrong doing...i was in a retail background huge pressure was placed on managers and staff to sell almost un-sellable extras that created lots of profit...when this was not being done to the companys liking people were threatned...managers actually intimidated and physically assailted members of staff...the staff then pretended to sell and created false paper work..there was no personal financial gain to them it was keeping a unethical company off of there backs.

[pugugly] 26/2/2007 17:34

miamisteve.ditto Thanks for post:-

but agree with you it does not make sense if there is no personal gain anywhere - I would suggest that they need to keep on digging.

[ttg100] 26/2/2007 17:30

ditto

will see how reacts tom
may buy a few

[ed 123] 26/2/2007 16:56

Thanks, miamisteve.

[miamisteve] 26/2/2007 16:43

Just had a talk with the company.

Learnt a few interesting things.

1) A forensic accountant is being appointed to look over the books.
2) There is no evidence of personal gain or misappropriation of stock. I suggested than therefore it must be incompetence and there reply was that it was deliberate but there was no gain. Doesn't make sense, but they are playing down the case of a large scale conspiracy.
3) 4-6 weeks is the timeframe for getting to the bottom of this.
4) the company owns the slate quarries which have a 100 year land bank. The NAV of this have not been calculated. The £11m hit to NAV is not to the landbank but to retained profits.
5) They stressed that the core parts of the business were the support services which were growing and performing ahead of expectations
6) The issues are for 2005 and part of 2006, although the forensic examination will reveal more.
7) I got the feeling that by distancing itself from the slate quarry they were contemplating offloading it and suggested that. I got a laugh ' Far to early to be talking about that '. Which sounded like yes but not now.

[pugugly] 26/2/2007 16:25

miamisteve:> Very much agreed re your last point. I was once offered, in a previous existance, cash in hand for swagging out stock very cheap. As it was the group ceo who had suggested I should visit the gentleman who made the offer I reported back to my MD. Was nerver sure if it was a test or if someone in the group was on the fiddle.

In this case it might be that those selling cheaply were obtaining a benefit. This is (imo) an area the forensic accountants s should investigate

[gco1133a] 26/2/2007 16:22

Pugugly

Auditors rarely pick up these things. It is a common misconception that their job is to look for and detect fraud. It is not.
There is no reason why there should be fraud anywhere else in the company. Senior management at Slate are responsible for just that part of the business.
I think the AFX update makes some good points.When something like this happens you are always going to get a few points knocked of your rating. On top of that there is the real loss in the value of the slate business. Add in the uncertainty of how much the hit will actually be and I don't see a significant quick bounce. Long term it's probably good value but over the next year or so while credibility is rebuilt I'm not so sure.

[miamisteve] 26/2/2007 16:02

Pugugly - The pre-selling is the reason I presume that profits for 2007 will be impacted.

Internal controls should have picked this up earlier. Agree.

Doubtful that it is a factor elsewhere in the company. Pretty much separate businesses.

My question is WHY?

I'd start by looking at who was getting cheap slate.

[pugugly] 26/2/2007 14:27

From the AFX update:-

"Managers appear to have been pre-selling slate at knockdown prices in order to shift the slate they say they've sold but haven't."

Worse and worse. Are they outstanding and possibly pre-paid orders to be delivered at a possilbe loss.

Are there potential 3rd party claims for late delivery agaisnt these orders?

Why was it not picked up by the external auditors?

A lot of questions still to be answered.

Full marks to the board however for coming clean (apparently0 as soon as they were alerted to the magniude of the problem and before they had all the answeres.

[pugugly] 26/2/2007 13:51

miamisteve:> Nice analysis. I think 2 worries are:-
1. Why was this only picked up internally? Why not by the main auditors
2. Probably more importantly - If slate was being sold at a discount how was this covered up against stock - Are stock levels overstated against physical product and semifinished product. Given that there may have been weak production controls how can the Board of the parent be sure that there has not been a massive rundown of finished stock - this is one way I would/could have fiddled the books - Another way could have been to have say 10% of the shipped product not invoiced via the sold ledger (Similar to the old supermarket manager trick of bringing in his own till)

In addition - If the books have been fiddled at SLATE where else have they been fiddled.

Another Company worry could be their Sainsbury contract (worth some £23M p/a) if Sainsbury are taken over.

I will be very interested in what you hear.

[miamisteve] 26/2/2007 13:39

I'd be very surprised if the serious fraud office did not get involved but the fraud is internal. They screwed themselves (ie Us, the shareholders).

When the dust settles it looks like the company is going to take a £30m hit. £11m in NAV, £13m in profits and another £6m for miscelleanious froth (restructuring etc.). This is a 5% of the companies value. I would then say that the fundamentals of the slate business would be quite different after restructuring. This would knock £2m from profits. So another 5% off the business. I would say -10% is the true impact of the scandal.

Slate was 13% of gross profit. On the balance of todays reaction I'd say that todays response is valuing this part of the company at zero.

I am getting a call back from the company later today with a few questions I had. Will post.

[pageo] 26/2/2007 13:07

not sure, the company say they now faca a serious fraud situation,on the side lines at the mow

[silverthread] 26/2/2007 13:01

Bought in for pretty rapid recovery ....... Based on the fact that this seems to be an isolated problem (dealt with decisively) in a non-core business affecting 10% or less of profit + the overall excellent performance of what are now mainstream divisions of the business.

[miamisteve] 26/2/2007 11:32

Ed - I was thinking the same. There's no synergies with the rest of the company and considering they were bumpfing up sales figures it is also clear that it is a stagnant business.

All of it's value is in it's assets. I think once sorted out it will be making only around £2m a year now. I will check through accounts but think that at auction the company could get close to NAV for it which could then be applied to something useful.

I suspect that they will announce at the results that they are disposing of the slate business.

[mountpleasant] 26/2/2007 11:27

Its hard core, slate can also be used for road surfacing. Thats enough of the puns.

[ed 123] 26/2/2007 10:52

It's good to retain some humour in the face of adversity.

I hope they tidy up the books and then sell off the slate business. It's non-core. Business services is where the growth and profits lie. It's also where their efforts and capital should be concentrated.

[miamisteve] 26/2/2007 10:41

(Oh Well if no one else is going to say it)

The management are going to get slated!

[ed 123] 26/2/2007 10:10

And some more.

[miamisteve] 26/2/2007 10:09

Buyers emerging now on L2. Still an overhang of 'sell at best' punters. See this closing at around £5.10

[miamisteve] 26/2/2007 10:01

chris79 - The strong share price performance has been a rerating as the company moved successfully from housebuilder to support service provider. It was still at a discount to it's peers before todays news.

[ed 123] 26/2/2007 09:50

And added some more.

[chris79] 26/2/2007 09:42

I am not a holder, but may look to pick up the stock.

I think this is a real overreaction on the share price - a bit like Interserve an otherwise strong company with an issue which they are resolving.

That said though the graph has been an unbelievable riser recently and does not allow for any bad news at all.

[ed 123] 26/2/2007 09:41

I've added to my holding. Impossible to catch the bottom but hopefully somewhere near it.

[miamisteve] 26/2/2007 09:27

They should end up with custodial sentences if proved true, but this is England.

I suspect all that will happen to the managers is that they will be fired, and end up working for one of the companies that they were selling cheap slate to.

[gbb483] 26/2/2007 09:24

Here's hoping they send the managers down the mines to recover the excess slate they sold in the old fashioned way (take a trip to the Llechwedd slate caverns at Blaenau Ffestiniog to see how). It won't help the reserves, but it'll do wonders for moral.