Aero Inventory Share Discussion Threads

[mdj8] 26/10/2009 19:44

Too much negative speculation here, along with some silly comments - are you miserable sods trying to give anyone that is invested a heart attack? You are all just guessing. Lets get back to what has been said:

"Whatever the outcome, the directors believe there will be no impact on either
the physical amount of inventory held or upon the Group's cash flows."

The above was in their statement to the exchange - it must be true or whoever issued it will go to prison for making a false declaration to the exchange. Its a valuation issue - it could be based on accounting rules, cost vs market value, exchange rates, the value of the Bill of Exchange (how do you value that?) or all manner of things.


Lets see what they say when they say it.

[40kj] 26/10/2009 19:39

C'mon, nobody really believed the inventory was worth that much anyway. If it had been the share price would have been massively higher.

[staverly] 26/10/2009 18:01

QS9 - I imagine the assets will be sold for one USD (possibly to DHL). Given that none of the R&A had a financial review this unusual situation would suggest that FD was very much the monkey and RL controlled everything. R.I.P. AI.

[koolio] 26/10/2009 17:17

Yeah well..Screw it!, for me this is the low point, I can accept the fact that Bevan is a Bevus and a lair. If I get anything back it will be a bonus. As investors we can do all the research that we like but without personal interaction we can't see S@*t like this coming.
The situation might not be as bad as it appears but only when we receive more solid information can we plan our next move.

No Gloating Boll.

[milacs] 26/10/2009 17:14

Was a main listing ever really considered by our management.

Reckon it was just a bit of flim flam to keep us suckers in the stock.

M

[qs9] 26/10/2009 17:01

I think perception will overtake reality when it is re-listed, but hopefully some heads will roll after this as it appears to be a mess. Main listing I would presume is now off the cards. Let's hope they can move reasonably quickly.

[staverly] 26/10/2009 16:13

Maybe the alleged bid last year was also a sleight of hand. Is it possible to demand some tangible proof that it was arms-length.

[boll] 26/10/2009 16:00

Refer my post 1654 chickens are coming home to roost with this one now - looks like they have overpaid inventory - goodby the dividend and probably most of the value of the company as well

[jr hartley] 26/10/2009 15:53

Agree this is shambolic and I'm as worried as anyone on here who has alot of cash tied up in AI. shares. However, the main reason I invested in this share was the safety margin (IMO) provided by the difference between the tangible asset value (based on inventory being correctly valued!)and the share price. The reasoning being that if worse case scenario happened and AI. go bust then the value of the parts (if correct and realisable)when sold on would eventually cover what was outstanding to the banks and the shareholders. My hope is that worse case we will take a short term hit from an inventory revaluation and then move on providing they have demonstrated positive cashflow generation during the last year.

If we focus on what we've been told ie potential stock valuation issue, but no impact on CASHFLOW and crunch a few numbers..........

1) Assuming stock valuation is reduced by $30m.....tangible asset value based on Dec 08 accounts and $1.60/£1 and 52m shares approx is reduced from £3.10 to £2.75 per share.

2) Assuming stock valuation is reduced by $50m..... tangible asset value based on Dec 08 accounts and $1.60/£1 and 52m shares approx is reduced from £3.10 to £2.51 per share.

Considering the price at suspension was £2.64, a $50m revaluation giving a real asset value of £2.51 per share is not too bad. You might consider me insane for saying this, but providing the cashflow figures are strong when the results are eventually released, and assuming the share price plunges when trading recommences, I'll be tempted to add significantly. Alot of assumptions but just trying to look at the facts based on what we know and have been told today.

[milacs] 26/10/2009 14:35

In light of the companies move from AIM to the main market of the London Stock Exchange the company is delaying the results to the end of October.

Did the investigation reveal inventory irregularities or were they known before the so called move.

What a shambles.

M

[richardbroughton] 26/10/2009 12:18

Mercury, the balance sheet of this company is all about stock/inventory, there is nothing else of consequence there. The P/L is also massively dependant on inventory valuation. Maybe over reaction but past experience and a lot of cynicism leads me to think not. I will be very surprised if the reaches the main index. I really hope I'm wrong because I will lose a lot of money on this one if I'm not.

[tday] 26/10/2009 12:01

mercury 123, it's been a complete ba;;s up - no excuses.

If anyone has talked down the sp, it's the directors.

[mercury123] 26/10/2009 11:49

I think everyone is over-reacting - the shares have been suspended not liquidated and just for this reason (ie the over-reaction which is entirely predictable). There'll be no shortage of people to talk it right down so they can fill their boots at the bottom. I'll be waiting to do just that!
This share is moving up out of AIM - generally a positive move - let's just wait and se how they resolve it and not anticipate the worst

[tday] 26/10/2009 11:42

Heads must and will roll.

Lewin looks done for, as does Hugh Bevan.

Just consider how much these guys have been paid, to get us to this point.

What irritates me is that at an AGM a few years ago, I raised a question as to the valuation of stock, obsolescence etc and was politely but firmly told that all was okay.

Glad I sold two thirds of my holding a month ago. Delayed results usually indicate bad news.

[sleveen] 26/10/2009 10:39

cjd/dht lets hope your conclusions are correct :-)

[daihardtoo] 26/10/2009 10:11

Unfortunately, for AI stock valuation has been made more complicated.
This is from the 2008 Annual Report:

"Where the Group purchases bulk stock at the commencement of a new contract, the price paid is determined based on physical inventory extant at a date which is typically several months before contract signing date. This allows the Group to evaluate the material in advance of purchase. The cost of the bulk purchase is allocated across all lines based on selling price. The consumption of any of this inventory by the customer in advance of contract signing is billed to the customer at contract prices. The billings of pre-contract consumption are not
recognised as revenue, as the Group does not bear the risks and rewards of the inventory until contract signing, but result in a margin accruing to the Group. This margin is deducted from the cost of inventory at signing date on a line by line basis. Similarly any purchases of inventory by the customer after the bulk stock is determined are paid for by the Group and recorded at cost on a line by line basis. Where, on a line by line basis, accrued margin on consumption exceeds cost to the Group the resulting credit is recorded as a reduction in cost of revenue over an appropriate period."

As far as I can see, two such contracts were signed in the 2008 Financial Year - ANA and ACTS.
The inventory purchase for ANA was only about $22M, so even if that stock was overstated by 50% it should not be catastrophic.
The purchase from ACTS, however, was in excess of $95M so the potential hit could be bigger.

[cjdrum] 26/10/2009 10:10

There's a fair bit of anger on here, mostly pointed at the auditors. I work in this industry and so can talk somewhat knowledgably about this.

The suggestion that inventory valuation is price times volume isn't correct. The RNS stated that the volume is accurate, and I would suggest that they have recorded the cost price accurately. What will have not been done sufficiently well is measuring the realisable value of the inventory (ie how much less than the purchase price it is worth). Some part of the inventory may be (to a lesser or greater degree) obsolete or damaged and this has not been previously identified. Agreed this should have been picked up during the audit, but the primary responsibility remains with the directors.

As an aside, material to this company is not necessarily as large as some may imagine. I would estimate that Deloitte would be using around £5m as their materiality level, so while this is highly regrettable news, I do not believe that we will lose our investment. The company is in a relatively strong position and so I don't foresee the banks pulling their loans based upon a technical covenant breach (working under the assumption that the reduction in value of the inventory wouldn't hit other covenants than late filing of accounts).

[mdj8] 26/10/2009 10:09

I worked at a company that changed the salary payment date. The reason was simply to align with a new accounting system, it annoyed a few union types who resented having to change their mortgage payment dates, but gave no financial benefit to the company.

The only significant acquisition of inventory I can see in 2008 was that from ANA, valued at US$22.5- million. I suppose that they have changed their base accounting currency from £ to US$ since then may have helped confuse things but this is suspension is unfortunate to say the least. - Of course it may all be genuine and I really hope it is but I feel rather uncomfortable at the moment.

[fr4dge] 26/10/2009 10:03

I'd also be very keen to join any action against the auditors.

It's their job to protect shareholders from just this type of thing.

If the issues are not dwon to fraud or theft then what's left.

Incompetence? If so, the auditors should have sopotted it.

Anybody got any other ideas?

[richardbroughton] 26/10/2009 09:58

Directors at the trough. Fear wipe out, this is the third share I have held over the 20 yrs to be suspended. Total loss on the others. Not optomistic. Very, very bad news. My own experience of auditors is that thay hate stock checking, long boring periods spent in warehouses and factories, usually juniors who haven't a clue what they are looking at most of the time. This is very strange, stock value is an easy calc. price * quantity, if no loss and no fraud, how can it be wrong? Looks like an overvaluation to beef up the accts, dont believe can be done in error
Will join any action against auditors.

[alphatrends] 26/10/2009 09:55

A friend of mine was made redundant a week or so a go along with a few others, they have no cash, employees used to get paid middle of the month, it was put back till the end of month due to cash flow problems. Business isnt great unfortunatly..

[fr4dge] 26/10/2009 09:44

Even I'd worked out that the valuation of the inventory was the key question mark over the company.

How could Deloittes sign off the accounts without checking that everything was in order.

What the hell is going on here?