Air Partner Share Discussion Threads

[lbo] 12/4/2018 18:11

"The Air Partner finance team identified this matter as part of the year-end closing process and following the proper procedure, escalated it to the Executive team who notified the Board"But for some reason they never "identified this matter" for the other 7 years that it existed?

[bouleversee] 12/4/2018 17:58

I showed the article to some friends who know more about accountancy than I do and they said that something similar happened at Tesco, the object being to inflate profits artificially in order to achieve bonus targets. I'm not suggesting this is the same but apparently a lot of this sort of stuff happens deliberately rather than through incompetence for nefarious reasons and it gets past the auditors. To be fair to the auditors, how are they supposed to know whether invoices are genuine or intended to be cancelled later? All beyond me but it could explain the steep fall, as with Tesco where I lost a lot of money.

Is it known who discovered the errors in this case?

[pvb] 12/4/2018 17:53

The language of yesterday's statement was still very vague and open ended "At this stage, we believe" "The final amount will be confirmed to the market after completion of the review"

"vague"? If they already knew the precise figures etc, then they wouldn't need to employ external auditors, would they?

"Between the period financial year ended 31 July 2011 and financial year ended 31 January 2017, taking into account expected adjustments, the Company had sufficient distributable reserves in each year to enable it to pay dividends legally"

But did they in 2011? Questionable when you look back at what they said in 2011 and what's turning up now!

Perhaps we, and you, will know the answers to these questions when the company does?

"Whilst our review is ongoing, we will not comment on rumour or speculation, and shareholders should expect official statements to be issued to recognised Regulatory Information Service providers as appropriate, ensuring full compliance with regulatory obligations"

What's the "rumour or speculation" they referring to!?

Err... Let me guess! :-)

[bouleversee] 12/4/2018 14:33

Something fishy.

[lbo] 12/4/2018 12:17

Suspect the company can't get their head around it all either and that's why PricewaterhouseCoopers LLP ('PwC') and Rosenblatt Solicitors ('Rosenblatt') have had to be sent in!Who knows what else will turn up!?The language of yesterday's statement was still very vague and open ended "At this stage, we believe" "The final amount will be confirmed to the market after completion of the review""Between the period financial year ended 31 July 2011 and financial year ended 31 January 2017, taking into account expected adjustments, the Company had sufficient distributable reserves in each year to enable it to pay dividends legally"But did they in 2011? Questionable when you look back at what they said in 2011 and what's turning up now!"Whilst our review is ongoing, we will not comment on rumour or speculation, and shareholders should expect official statements to be issued to recognised Regulatory Information Service providers as appropriate, ensuring full compliance with regulatory obligations"What's the "rumour or speculation" they referring to!?

[bouleversee] 12/4/2018 11:57

I can't get my head round it at all. Not having seen anything in The Times about this and aware that my substantial profit had turned into substantial loss, I emailed the Business Editor and suggested they might like to do a report, which duly appeared this morning. However, it is still as clear as mud so far as I am concerned. It says: "It is understood that the issue surrounds a single account with a large regular customer in which income was misallocated. It is believed that invoices for services that were not going to be paid were accounted for as receivables and then deferred income, thereby inflating declared numbers when the figures should have been written off." Why were the invoices not going to be paid? If you invoice someone, you expect to be paid and if you have agreed to supply a free service for some unknown reason, why would you raise an invoice at all? There seems to be something more than incompetence here.

The article also says the issue goes back to 2011 which "was the year when Air Partner changed its auditor from Mazars, a mid-sized firm, to Deloitte, a Big Four Accountant". So does the company have redress against Deloitte? For the fees which are paid to these expensive auditors, is their job not to discover this sort of error, if that's all it was? I really don't get it. I admit I am not familiar with accountancy procedures but it looks as though Air Partner's staff and auditors weren't either. I hope the directors won't be collecting any bonuses for some time to come.

[trident5] 12/4/2018 10:44

Looks like they had £3.1m of costs to be set against £3.1m of revenue.

They paid the costs - but couldn't then collect the revenue, because they didnt have the right paperwork.

Then someone moved the debtors about on the balance sheet instead of writing it up and the senior management didn't pick it up - which is the bit that's really hard to grasp.

[stemis] 12/4/2018 10:20

But they are different issues. The 2011 was about payment of amounts due to suppliers. The current issue is about write off of amounts due from customers.

[brownmruk] 12/4/2018 10:18

Hang on - I've confused myself now and wish I hadn't looked at this. The £3.1m cash outflow in 2011 was for the other side of these accounting entries. They had accrued £3.1m of expenses against charter contracts carried out by operators that had not been invoiced. Presumably this situation had built up because AIR had not collected the fees for these charters. They chased up the invoices and paid the operators. But they didn't correct the deferred revenue side and that is what they are doing now.
I think.

[lbo] 12/4/2018 09:50

So another misrepresentation that they have put out "Legacy issues have been tackled in this period" as a few years later they have more issues! Does not inspire confidence!

[brownmruk] 12/4/2018 09:29

Yes, but from the 2011 finals -

Cash during the period fell by £4.5 million to £7.2 million. This was the result of a number of one-off cash outflows – principally,
the resolution of historic accruals (£3.1 million), settlement of claims in relation to the discontinued private jet operating company
(£0.6 million) and payments related to the relocation of the UK office (£0.6 million). Excluding these items, cash would have been
£11.5 million, broadly in line with the opening position.
Internal Controls
Legacy issues have been tackled in this period. As set out above, a cash payment of £3.1 million was made in settlement
of historic accruals.

So, they sorted out the cash position back in 2011 but since then made some similar accounting errors albeit less frequently or with smaller amounts?

[lbo] 12/4/2018 07:41

But they just confirmed yesterday the net cash has indeed fallen since the interims last year. Also the announcement just a few days ago suggested that the problems go back to 2011 and that a "significant proportion of this relates back to 2011". And then when you look back to 2011 the interims back then contain the following:"Recent attention has focused on current liabilities, which contain an accrual for expenses of £3.1 million. These expenses are amounts that Air Partner has invoiced and accrued for, over a number of years, relating to charter contracts, in anticipation of receiving matching invoices from operators which have not in fact been received. A review of this balance indicates that it should no longer be retained. Contact has therefore been made with the relevant third parties and Air Partner is investigating, with those parties, the closing out of this accrual. The Board does not expect any material impact on profit although there will be an anticipated £3.1 million cash outflow in the second half of this financial year"So they knew about an issue back in 2011 but now 7 years later something else resurfaces? Sounds like a lot more then a control and checking issue in light of this.

[stemis] 11/4/2018 22:24

As a non shareholder looking in, the original statement "Certain uncollected receivables were inappropriately offset against deferred income rather than being expensed to the income statement" does seem rather ambiguous.

A chunk of AIR's invoicing seems to be for services not yet delivered. This is treated as deferred revenue and only released to the P&L when the services are actually delivered. Now in theory, if the services haven't been delivered by the time the invoice is written off, they would just back it out of deferred revenue. However if the services have been delivered (i.e. the revenue has been released to the P&L) then the write off would also be to the P&L.

What this seems to be about is the calculation of deferred revenue, i.e it's about revenue recognition in the P&L. With deferred revenue at the interims being £44m, the annual profit of around £6-7 million is pretty sensitive to getting this right. That's clearly why they've brought PwC into to check it all and why the market has reacted so severely. It also why it's non cashflow (just a reclassification between deferred revenue and P&L - current or historic) and why it probably went undetected. It's a control and checking issue, not just a few write offs...

[al h] 11/4/2018 21:17

spacedust = ramping idiot, all over the boards like a rash.

[spacedust] 11/4/2018 20:40

I think the management have done the right thing. They needed to issue clarification on the situation and have done that. Onwards from here

[lbo] 11/4/2018 18:50

A week ago they it was only £3.3m error which has now risen to £4m and they also said "This is a non-cash item and has no bearing on the Company's cash balances"Yet today they announced a fall in cash from £10.6m at the last interims to now £8.6m at the end of March 2018?Also all that aside EPS forecast for next year was only 9p and the year after only 10p which we now know will also be reduced due to the costs of resolving this accounting mess being expensed now next year.

[topvest] 11/4/2018 18:12

Time will tell on this. It will take a few weeks to complete an investigation including going through 7 years of emails.

[goodpick] 11/4/2018 17:32

Spacedust that would be nice, though I do expect it to pick up again tomorrow as more people read the RNS this evening and reflect and catch up tomorrow.

I expect £1.10 / £1.20 ish and then some stabilisation once confidence is built back up.

These shares seem to be quite lightly traded and with a wide spread which might explain why they are so volatile....

so it wont take much to take these back up just in the same way they dramatically went down on the first RNS.

[spacedust] 11/4/2018 16:57

Back to 120p tomorrow then will be higher then where it started which was 150p. Will be 180p by month end

[dontay] 11/4/2018 13:19

Their was probably an element of overselling but considering the share price was well ahead of reality for this stock in the first place ... the recovery to somewhere just under 100p seems about right.Due to the damage in confidence... especially for the Jet Card scheme customers which acted as a barometer and provided some realistic 'guidance visibility' for future jet charter bookings... will be considerable. It's a shame the fallout from this is being pushed out till the next financial year. All important TRUST would have been better served if it was over and done with ASAP. Maybe time now at these 'low levels' ... for the bod to show THEIR confidence in the future by spending THEIR own dosh!

[lbo] 11/4/2018 12:48

Many see the private jet charter market as only getting more and competitive. BBA aviation have invested in Victor. And other competitors like Jetsmarter and SurfAir are also expanding. Add in any reduction in demand from an economic slow down and profits will disappear overnight in the sector.https://www.prnewswire.com/news-releases/leading-on-demand-jet-charter-marketplace-victor-raises-18m-from-bba-aviation-bp-ventures-and-existing-shareholders-300589821.htmlLeading private jet charter marketplace leader Victor today announces an $18m co-investment from BBA Aviation, BP Ventures and existing shareholders to help form the newly-created Alyssum Group

[steeplejack] 11/4/2018 12:19

Interestingly,GAMA was being touted as a good buy by Motley Fool commentators about two months back.Very tricky to know how to rate these charter stocks because by their own admission,things are pretty short term and circumstances can change on a sixpence.Thats why AIR has a fixed dividend cover policy to reward shareholders out of annual profits.AIR yields 5.5 per cent at a quid.Thats not exceptional given yields on the like of Billiton,BATS,GSK etc but it's attractive and....in the absence of further horrors....restricts downside.What doesnt kill you makes you stronger.There might ultimately be a silver lining for AIR out of all this.Is Gama a buy?I'd want to do some further research before investing in a situation like this, but I'm cautiously optimistic about this deal. Gama has generated a high return on capital employed in recent years, which is usually a good indicator that management is investing wisely.With the stock trading on a forecast P/E of about 10, pre-placing, I believe this could be a potential growth buy.

[lbo] 11/4/2018 11:17

Its called GAMA Aviation PLC (GMAA) and a few years ago it used to trade over £3 per share.

[mutantcar] 11/4/2018 11:01

Do you mean GAMA that's down 10% from it's all time high, and still in it's long term uptrend?