Aero Inventory Share Discussion Threads

[typo56] 12/11/2009 19:41

I wonder whether they planned to take advantage of the move to the main market and slip out a fund raising, like AFR a couple of days ago. Perhaps the game was up when it came to preparing the prospectus?

[angel of the north] 12/11/2009 18:12

Even by AIM's somewhat looser standards of corporate governance yesterday's announcement of the appointment of administrators to Aero Inventory plc, coming only 42 days after the Group announced an intention to move to the main market, is surely outrageous!

These were forefront on my radar to buy - a very lucky escape for me but commiserations to those caught up in this debacle.

[staverly] 12/11/2009 17:05

Teddies .... Given that the burgeoning debt was exclusively supported against "inventory", my understanding (through past discussions with analysts) was that the bank would have required the appropriate reassurance on a quarterly basis. Obviously there has been a rubber stamping job going on for some while; I surmise that auditors took a laissez faire attitude and accepted of position as stated by lenders rather than conduct their own investigations. Whatever else can be levelled at RL, he obviously was extremely well connected as evidenced by the unusually generous terms of the debt financing; perhaps this cosy relationship was not as unrelated as some might think and some squit auditor failed to take account of this.

[ggekk0] 12/11/2009 16:28

Company Administration is designed to allow a business to continue to trade while a plan is formulated to achieve one of the following:

•Rescue the company as a going concern after making operational changes.
•Achieve a better price for the company's assets or otherwise realise their value more favourably for the creditors as a whole than would be likely if the company were simply wound up without first being in administration.
•Realise property in order to make a distribution to one or more secured or preferential creditors.

[ggekk0] 12/11/2009 16:26

No later than 8 weeks after the company enters administration, the administrator must make a statement setting out proposals for achieving the purpose of the administration or explaining why they cannot be achieved. The proposals may include a voluntary arrangement or a compromise or arrangement with creditors or shareholders.

The statement setting out the proposals must be sent to the following:
• The Registrar of Companies
• Every creditor of the company with an invitation to an initial creditors' meeting, if one is to be held
• Every shareholder of the company, unless the administrator publishes a notice to the effect that he will provide a copy free of charge to any member of the company who applies in writing for a copy.

[porsche boxster] 12/11/2009 15:12

I take it that the KPMG review will include a report to shareholders upon their findings, from which we can see their conclusions and then take any action as appropriate from that stage.

[masurenguy] 12/11/2009 15:03

Holding and distributing aero parts inventory was the core of their business model. Some $500m in bank loans to finance this were collateralised by their inventory. This key asset obviously needed to be verified at the annual audit.

Clearly there is a significant discrepancy between reported and actual inventory both in terms of physical stock and valuation. How big this discrepancy is remains to be seen but it appears to be material enough for the three main executive directors to be terminated and for the bank to pull the plug. Nobody can yet accurately quantify the discrepancies until the Administrators have completed their initial evaluation.

Presumably the auditors will be invited to comment on the difference between their approved audit figure and the Administrators figure when the latter has completed their physical count and valuation.

[madmonkflin] 12/11/2009 13:46

envirovision - bizarre mate, the auditors are responsible for auditing the stock, i.e confimring it exists, they report to the shareholders, noone else. If they screwed up which they clearly have they're to blame. That means if all the shareholders get together they can sue the @uckers if they can prove loss, i.e. invested based on the last set of accounts (which were supposed to be audited) :)

[evaluate] 12/11/2009 13:44

Correct dh2.

The auditors don't get paid $400K just to add up the numbers that AI. give them.

Their job is to check the numbers given are reliable.

IMV either:

a) the systems they had in place were wholly inadequate AND / OR
b) a massive frad has been perpetrated by the management

If it's a), then Deloitte's should have spotted it. It is a major part of what they get paid $400K to do.

I'd have more sympathy with Deloitte's if they had been decieved by a sophisticated fraud, but the noises we are hearing here would seem to indicate that it's more about incompetence - albeit, management appear to have known about it for a while & have hidden it from the investment community - which is an offence.

Regardless, it looks to me like Deloitte's have failed in their duties here.

[envirovision] 12/11/2009 13:42

Unless they were doing the stock take, how would they know? Take a look at their report, it should tell you clearly the basis on which it was prepared, which in turn will be based upon the companies own audit plan.

Yes stranger things have happened, but I should be astonished if Deloitte could be criticised in any way let alone held accountable for such a debacle.

[hvs] 12/11/2009 13:40

The so called "auditors" should be taken to task.

Very very sloppy.

[daihardtoo] 12/11/2009 13:28

and I think that you are missing the point that the $400k that the company paid to the auditors was for them to plan and perform an audit that would give reasonable assurance that the numbers were free from material mis-statement.

Effectively, they are supposed to be the insurance in case the directors haven't done it right.

[envirovision] 12/11/2009 13:12

I think some of your are missing the point re Deloitte. The company themselves were the auditors of their stock and stock control.

Figures should be checked systematically, either through a regular audit of stock - stocktaking - or an ongoing programme of checking stock - rolling stocktake. Unless contracted out to anouther party, its the companies responsability. The name of the company gives it away, aero inventory, this is what they were supposed to be experts in. i.e. stock control.

At the end of the day, Deloitte's report and accounts can only be based on data and what the company themselves have told them.

[madmonkflin] 12/11/2009 13:06

you might as well complain to the Institute of Chartered Accountants about the FD as he's the one responsible for making sure the numbers stack up.

[masurenguy] 12/11/2009 13:03

I understand your indignation but do you really think that they will give a toss !

[daihardtoo] 12/11/2009 12:59

I am certainly going to write to Rupert Lewin at "163E Porchester Terrace North, London W2 6BJ" to let him know what I think.

(It's very useful doing a search at Companies House, because the Annual Return gives the home addresses of all of the directors.)

So I am also going to write to Hugh Charles Bevan at "Manor House, Church Road, Upper Faringdon, Alton, Hampshire GU34 3EG" and I will tell him that he has cost me alot of money!

[hvs] 12/11/2009 12:43

White collar "CRIME" goes unpunished.

[porsche boxster] 12/11/2009 11:14

My system has shown a trade gone through today at 5p for 701 shares. A technical blip?

[evaluate] 12/11/2009 11:10

I totally agree - it's bull to say Deloitte's have done their job satisfactorily.

They appear to have failed to notice that an Inventory Management company that had all of its worth (& more) apparently tied up in stock did not have an adequate stock control system.

IMHO it's negligent & Deloitte's should be sued - to the max.

[daihardtoo] 12/11/2009 10:57

teddies

This is directly from their audit report for the 2008 accounts:

"...we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit..."

and

"We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements."

and finally

"In our opinion:
- the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group's affairs as at 30 June 2008 and of its profit for the year then ended;

- the Parent Company's financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of the Parent Company's affairs as at 30 June 2008;

- the financial statements have been properly prepared in accordance with the Companies Act 1985; and

- the information given in the Directors' Report is consistent with the financial statements."



It appears that the way that they planned their audit totally failed to identify a mis-statement of such magnitude that the company has collapsed!!!!

Yes, the Directors are responsible - but Deloitte & Touche cannot hide behind a requirement to do the legal minimum amount of work.

[extrader] 12/11/2009 10:37

The company's USP was managing inventory = stock on behalf of 3rd parties....you'd think the auditors would have concentrated on this area !

Not a holder, but only because I got distracted by something else when I was looking to buy in.....

[teddies] 12/11/2009 10:23

Poor old Deloittes, don't think they've done much wrong really given they are a Cheshire based advertising and marketing firm (

I'm assuming you mean Deloitte. I imagine any audit they complete will have been inline with APB/FRC requirements, they'll have known stock was the key balance and will have made sure their testing met what was legally required. Sadly, the buck stops with the directors.

[evaluate] 12/11/2009 09:39

MartinC,

I think we all felt we could trust Deloittes to do their job.

It looks like we were wrong on that assumption.

Astonishing really.