Mayflower Share Discussion Threads

[nipper33] 24/4/2005 09:48

Thanks.When do you think this will all be made public?

[anomalous] 17/4/2005 20:25

The reason that soysoy and myself could not say anything, was because the newspapers have the story and wanted the exclusive. They haven't run it, because they are concerned that the directors might sue. So they are waiting for the AIDB or DTI report, so that they are covered.

The papers know far more than has been reported here. I'm sure that when it does come out, certain regulators are going to face some embarassing questions too.

It is possible that some shareholders might claim compensation, because the share should have been suspended far sooner. In fact, if the share had been suspended then the company may have been able to survive after drastic restructuring.

The main problem was the directors were in denial. They would not admit to the seriousness of the situation when the banks backed down on the refinancing and the black hole became known.

Working through a time line of the last six months of Mayflower's existence, the tipping point was in early December 2003 the board agreed to go ahead with a refinancing based on a belief they would achieve their profit and debt forecasts and meet covenants.

Eight items were identified which had to go right to just achieve this, an aggressive stance. The profits steadily crumbled and the company put a massive squeeze on working capital in an attempt to meet the covenants. This large reduction in debt handed the position to the banks on a plate who never allowed it to increase. It eventually made it a lot easier decision for them to foreclose than if the debt had been much higher.

One of the most striking features of the last six months was the way the profit forecasts crumbled so much in such a short time. Forecasts at the beginning of this period were for £22 million of pretax profits and £3 million of exceptional charges.

By the time the company collapsed this had become about £6 million pretax and approx £37 million of exceptional charges. A net change of some £50 million. No detail was given but it certainly raises some important questions as to how this could happen in a public company.

That's where the DTI will probably focus their enquiry, because there are similarities between Mayflower and MG Rover.

[nipper33] 17/4/2005 17:30

Thanks,I just wondered.Just seemed to go a bit quiet.

[anomalous] 17/4/2005 13:01

Some money did go adrift. We are confident that the DTI report will address this matter. There are quite a few similarities between what happened to Mayflower and what happened to MG Rover last week.

[nipper33] 16/4/2005 14:35

What about the pension black hole? I thought some £20m went adrift?

[soysoy] 15/4/2005 16:16

Yesterday afternoon, David Bryan, formerly the Director of Corporate Finance for Mayflower Corporation plc, gave a presentation of the failure of Mayflower for the 3rd Annual European Corporate Restructuring Summit at the Carlton Tower in London.

In his talk, David explained the reasons (in his view) behind the collapse of Mayflower and the key contributory facts. He gave these as:
Lack of Credibility of the Company
Forecasts that were way out and unrealistic and therefore causing profit warnings
Fraud, the missing millions due to the accounting problems at Dennis
Denial by the management of the very serious problems and difficulties the company
David did not believe that the Fraud was in itself the prime cause of the collapse. It was the straw on the camel's back that eventually caused the snowball to start rolling. We can explain Mayflower problems if we briefly review their history

Mayflower had started out small, but by taking advantage of booming markets in car, bus and truck manufacturing, they managed to make spectacular profits and massive growth. They were the 'darlings of the City'. The company had entered into a series of acquisitions over a period of many years. The one that caused the trouble was the hostile takeover of Dennis in 1998. The company managed to complete the acquisition against rival Henlys, but in doing so, put the main company into serious debt of over £200 million. Afterwards, the company managed to service this debt and through the expense of squeezing the working capital and even managed to reduce it. In 2002, they did a rights issue to try and reduce it further. However, even with this issue, the debt situation was actually getting worse, because the market for the products had dried up. The company was not as profitable as before and was not growing.

The management then proceeded to diversify, by ordering a ship to install wind farms at sea and a plant to manufacture stamped metal products for Ford. Both projects were basically disastrous for the finances, as the ship was ordered for £25 million and eventually cost £54 million and was months late, whilst the stamping plant cost £25 million but was under-utilised. It had so much capacity that for the only contract they had (with Ford), they could fulfil all the orders if they worked just two days each week. Sadly this contract was not enough to give an adequate return.

So the board of directors had approved projects that swallowed up £75 million of the company's funds, yet they were not making sufficient return to justify the expenditure.

In 2003, the company had to refinance their debt. They needed £150 million to complete the renewal of funding. Four banks agreed to stump up £20 million a piece. The company did a presentation to 35 other banks and expected to get the other £70 million. There were no takers.....none at all. The banks themselves were amazed and said this had never happened before. It seems that the other banks had little confidence in the company and decided to waive any investment. After that, the other 4 banks pulled out and the company was left desperately short of cash.

A Chief Restructuring Officer was employed at the insistence of the debt holding banks, to try and prune the company down and find the cash to survive. Then the accounting 'Black Hole' of £17 million was discovered. This was an accounting fraud that had been in existence for over 4 years. It started when Dennis used invoice factoring, to enable them to gain short term finance. What was happening was that the company was receiving cash on time, that actually belonged to the bank (because of the factoring) and holding onto the cash for many weeks, before reporting that they had received it. They deceived the banks by keeping two sets of accounting books. One with false dates of receipt and the other with the real dates. This error was not done to personally enrich anyone. It was merely an accounting error that was made worse with an attempt to conceal it. So Mayflower had reported a financial position which was at odds with the true state of affairs.

The company had made various forecasts as to profit. These were way out, because they company had included many exceptional items that were huge. As much as £38 million. The company was forced to make a series of profit warnings to the market. When the refinancing failed and the CRO was unable to restructure the company and the fraud became known, several key members of the board either resigned of were forced to go. From there, the company had only a matter of days to survive.

In conclusion, David was of the opinion that the company could have survived. If the restructuring had been more thorough and the management not buried their heads in the sand, then the company could have been put in a position to survive. Instead, it caused an almightily splash when it crashed. The company had debts of £300 million. The administration cost £15 million and many extremely valuable capital assets, such as the wind farm ship, were sold at knock down and fire sale prices. The ship cost £54 million and sold for £10 million to a management buy-out. It has since been in almost constant use installing wind farms around the British Isles. Of the remainder, many of the plants are still in operation or have been bought out by other firms. Those that would have been 'pruned' as dead wood have closed. But some still survive at smaller capacity. It is ironic that the plant that was initially constructed to profitably produce parts for the MGF, is now threatened by the collapse of Rover MG. The total recovery by the creditors (mostly the banks) was £120 million.

It's possible that in both cases, Mayflower and Rover MG, the companies might have been able to survive if they were able to restructure sooner and to a leaner operation. As it is now, both will probably collapse and end in another engineering loss to Great Britain. The Rover collapse, occurring as it did in a General Election is sure to cause an enquiry. The Mayflower collapse is currently under investigation by two bodies. The Accountancy Investigation and Disciplinary Board and the Department of Trade and Industry. The results of one of these is expected in the following months.

[soysoy] 14/4/2005 16:03

no jaknife

[ecomkid] 14/4/2005 10:04

as it is, MFW is indeed a dead delisted stock.

why give up hope, if there is a chance that you can salvage a little bit from it ? There is no harm in trying . IMO

[soysoy] 14/4/2005 06:57

3rd Annual European Corporate Restructuring Summit


15:35 Afternoon tea and networking

16:00 Practical restructuring issues
David Lovett, Managing Director, AlixPartners
Finbarr O'Connor, Senior Managing Director, Head Corporate Finance and restructuring, FTI Consulting

16:40 Case study: The Mayflower Corporation
David Bryan, Independent Interim Executive, formerly Director of Corporate Finance, The Mayflower Corporation PLC

[soysoy] 11/4/2005 18:30

This Thursday at 4 40 pm could be interesting

[soysoy] 08/4/2005 20:19

Hope to give everyone a update at the end of next week

[soysoy] 19/3/2005 13:05

Been a bit busy
and I will get back to thoese who have sent me email ,VERY SOON
I will be able to give you update in Aprill
when the report will be published
The Mayflower investigation is the first inquiry by the AIDB, set up in May as part of a new independent regulator for the accounting profession to deal with allegations of misconduct against accountants
and also the

It is also understood that Trade Secretary Patricia Hewitt order under Section 447 of the Companies Act, which allows for confidential investigations where there is suspicion of misconduct. a enquirey into MAYFLOWER
It is not known if former Prime Minister John Major, a Mayflower director in 2000, has been interviewed as part of the secret inquiry launched last year.

[scribbler101] 11/3/2005 14:16

gswr - direct investment requires a degree of attention!

[gswredland] 07/3/2005 19:31

i have not been around for ages and had a reasonable holding in this co. Have they gone bust?
Can i sett this loss against profits in next tax year?

[scribbler101] 01/3/2005 18:11

IMHO a neg. value claim for the present tax year s/b no problem at all.

UNFORTUNATELY!


If it's important, suggest you contact your tax office for confirmation before the tax year end - then you can sell for a penny if they are unco-operative!

[plutonian] 01/3/2005 16:44

Thanks.

Looks like I will have to pay the tax then :-(

[dotcunningham] 01/3/2005 16:32

Negligible Value agreements to 31/01/05

Not on the list yet. This is the link.

[soysoy] 01/3/2005 16:09

i dont think they do yet as they are still suspended

[plutonian] 01/3/2005 16:01

Does anyone know if these shares count as a CGT loss in this tax year?

I would like to offset against other gains, but do we have to wait for an official de-listing to take the loss?

[ecomkid] 25/2/2005 20:09

good work soysoy. and thanks for updating.