Pcf Share Discussion Threads

[seasidehippo] 24/10/2021 11:33

Impossible to say but I do think the egg came before the chicken!! if that helps?

[cc2014] 24/10/2021 11:33

Or the PRA instructed them to clean up their balance sheet.

[hopespr1ngseternal] 23/10/2021 18:29

Am curious to know which came first: the decision to review impairment of defaulted receivables ‘against historical expectations’; or the decision to sell defaulted receivables ‘to enable operating efficiencies for the group’. Which was the cart and which the horse? Is it ingenuous to suppose that, if the scale of operating efficiencies is material, that will improve margins going forward and will enable the impairment charge of 6m to be recouped over time. Classic kitchen sink stuff.

[hopespr1ngseternal] 22/10/2021 13:10

Thank you CC for reconciling the numbers. Mea culpa again. Relieved that your absence from this Board was so brief. We need your input.

[cc2014] 22/10/2021 09:42

We have previously considered whether PCF not taking savers deposits reflected informal action by the PRA over loans.

I believe this is still highly likely but we now know PCF have recently sold some of the "defaulted receiveables".. Regrettably we don't know how much. We don't know whether they've sold £5m, £10m or £20m or whatever.

This is cash they won't need from savers.

[joe say] 22/10/2021 08:25

Good point and the gap between the two is from -2.85 to -5.00 (as its an extra 6m on the additional impairment)

[cc2014] 22/10/2021 08:19

£3.9m is the underlying profit not the actual profit which is £2.1m

[joe say] 22/10/2021 07:54

Personally I wouldn't be so lenient on the incoming CFO

He has a duty to keep the market informed as a board member AND as the prime driver of RNS's in a company (Usually him or the company secretary in my experience). In fact that's why his name appears at the bottom of every RNS as a matter of routine.

He also has a responsibility to ensure efficient use of resources and what I can't get over is the sheer amount of time it has taken to get to this position - with both internal and external resource working on the figures.

And in a possible answer to hopespring - could the difference be the associated 'professional' fees? After all they relate to the period under review so it would seem right to account for them then.

[hopespr1ngseternal] 22/10/2021 03:47

Still doesn’t add up. 3.9-0.75-7 = -3.85 not -5.

[hopespr1ngseternal] 21/10/2021 14:49

Well said Hippo. Credit where credit is due. It is the communication with minority shareholders that has been dire and my broker thinks the RNSs are probably drafted by Tavistock with input from the company’s broker - which is why they are so appallingly bad. What we need now is a cracking CEO. This is not a criticism of Stran but we need a big name since restoring confidence within the investment community is not going to be easy.

[seasidehippo] 21/10/2021 14:38

On a positive note it would appear we have acquired a cracking CFO who has not shirked responsibility in sorting this mess out. In addition I have a certain amount of sympathy regarding the time it has taken in:- enhancing the Finance Team; managing the review and resolution of historical accounts; changing accounting processes; producing monthly management accounts etc etc

[hopespr1ngseternal] 21/10/2021 14:28

Millaree: I am prepared to take at face value the statement in today’s RNS that the review of company’s accounts has been ‘exhaustive217;.

[rmillaree] 21/10/2021 14:19

"These will be clean accounts as the kitchen sink and I suspect quite a bit more has gone into 2020."

Lets hope so but .........

[hopespr1ngseternal] 21/10/2021 13:39

We are in the end game now. Before the suspension can be lifted the company has to file its 2021 half year accounts covering the six months to March 2021. That will give shareholders the first indication of sustainable profit going forward. That and full year 2021 guidance is what we need to see. These will be clean accounts as the kitchen sink and I suspect quite a bit more has gone into 2020.

[hopespr1ngseternal] 21/10/2021 13:32

Graham: the original concern in May/June was regulatory breaches and irregular conduct within the finance team. This was the ball on which they had their eye in May/June. This does not excuse anything but it may go some way to explain why impairments were not front and centre then particularly as the impairment number had already been settled with EY.

[graham1ty] 21/10/2021 11:40

IFRS9, while a complete mess, was meant to make provisioning a more “objectiveR21; exercise, and ensure that every loan was looked at, on a case by case basis, taking into account the economy etc etc. It has been a hot topic for a few years now, and you would have expected a major role of the auditors ( and Audit Committee) was to ensure if was being properly implemented.

So, worries about impairments were obvious. But should have been so six months ago, not now

[rmillaree] 21/10/2021 11:34

seasidehippo

Is this why I wonder impairment charges have been so good in the past? If so does some of this charge relate to prior years and need to be accounted for accordingly?

Practicably speaking i think this is highly likely to be the case - i am presuming they never did make the money they said they were making as provisions weren't robustly sufficient. Note its always guesswork though ref provisioning and i would say that after a thorough overhall of numbers swapping from sketchy to preumably real or perhaps conservative numbers a less than 1.5% adjustment to the value of the debtor book (433 mill) isnt that bad compared to many companies that uncover material issues like this.
I wouldnt have blinked had they made this adjustment in october 2020 at the proper time i must say. So i am suprised anyoneis shocked by either this being the issue or the size of this issue. I did have slight niggling worry bad debt provisions werre low - but i got blineded by the fact there was good upside if they continued expanding. I also thought with simple loan types they should really have a decent handle. I don't blame anyone but me for investing here as the warning sign was there ref low provision rates.


Ref whether wrongs were ref prior year or solely 2020 related we dont have enough info to be sure here though - so it might be that covid was bigger trigger and prior years werent that out of alignment or that they are now using later known info that they they really shouldnt have used at the time. I suspect its unlikely there wasnt at least material impact from prior year wrongs though.

Facts are ref audits the whole systemn is not up to the job of protecting us - after 12 months of looking in every nook and cranny they only manager to find £1.5% in total - so possibly in % terms more a ticking off for the auditor than anything. I wander if azulke is more at fault here - although i would have thought they would flag up if that was the case.

The rules should be changed though so that anything declared in this regard MUST be ultra cautious and ALWAYS done to a rigorous high standards - probably independent checks should be done by regulators on high numbers at any moment in time if there are concerns - be they from auditor - employee - customer/supplier or shareholder. I presume someone who forensically looks at stuff like this on day to day basis would see guff when its put infront of them and take that guff to task. That then simply leaves intentional manipulation of numbers which is much hader to factor in. Standards are very unlikely to be improved though unfortunately. Iknow if the bods in charge had more direct responsibility for being "fact checked" atany moment in time i suspect they would be less likely to proceed with pushing boundaries to the limit in the fuill knowledge that all an auditor will do is perhaps ask them to nicely make an adjustment to part of their aggressive behaviour.

[seasidehippo] 21/10/2021 10:57

Is this why I wonder impairment charges have been so good in the past? If so does some of this charge relate to prior years and need to be accounted for accordingly?

In my opinion, from the limited amount of information provided, the External Auditors, Internal Auditors and Audit Committee should all hang their heads in shame.

[graham1ty] 21/10/2021 10:35

I just repeat what I have said before. The Boards earlier statement below, about “timely, transparent and comprehensive” was either incredibly cynical or just farcically wrong.

“The Board wishes to thank its shareholders, customers and other stakeholders for their patience and the valued support they have provided to the PCF Group during this difficult time and wishes to reaffirm that it is committed to provide updates in a timely, transparent and comprehensive manner."

[cc2014] 21/10/2021 09:35

I'm staggered. The RNS is staggering enough but the closing statement is shocking.

... is well progressed. Not "this substantially concludes work on the finalisation of the 2020 accounts and we expect these to be completed in the week"

Suggesting this doesn't conclude the financial accounts and therefore there are still other items under dispute?? or not??



The impairments. I'm shocked. As others have eloquently said, how can it possibly have taken this long to inform us that the issue relates to impairments. It's the very most obvious place to start and the very most obvious place it always goes wrong. Shocking.

Now, regarding the actual issue, I find the RNS quite evasive by omission again. The Board are trying to be clever with their words but it just reflects their attitude to transparency. I refer to the additional £6m of impairments which is on top of the £7.8m they had already provided for in the unaudited accounts. So, actually that a total of £13.8m of impairments and considering every other bank has been writing back their impairments as they took too much for Covid it look terrible.

Then they magically manage to sell the "defaulted debts" on to a third party as if they are doing the shareholders a favour. I suggest they have been trying to do this for at least a month and it is this that has crystallised this morning's RNS.

Additionally I would like to know more about the sale. Have they sold £7m of debts for £1m, or £30m of debt for £24m. One looks very different that the other


When I'm in the mood I might try and dig my notes out and work out what this does to their capital ratios.

[joe say] 21/10/2021 08:42

Never mind how long it took to realise - look how long it took to calculate

Ludicrous

[graham1ty] 21/10/2021 08:27

And rmillaree, fraud, or the Azule misstatement, might not have been forseeable.

However, impairments, defaults, etc are all that banks have been talking about for 18 months, once Covid kicked in, and lockdowns started. It is the first place there might have been problems .....
And it is as if is has taken the Board five months to realise this.....

[rmillaree] 21/10/2021 08:22

Graham1TY
I would presume that you are wrong when you say they should much lower level of provisions going forward - this company has always had low provisions this adjustment has confirmed to me that future provisioning is likely to be higher not lower if they do it right in the first place next time all other things being equal - albeit this may be masked somewhat temporarily by the presumed kitchen sink job that may have been done.

Ref the assets I am guessing the issue arises when someone offloads asset for cash or similar to third party without proceeds being paid to pcf in which case they would have a nightmare job trying to rectify even if they did legally have a call on such assets.
Could be an element of fraud liquidation over valuations and lack of early expected payments or too high a ballon payment who knows.

Hopefully the 6 mill is more likely than not the final hit remember other stuff has been looked at twice previously it ain’t over yet though

The sad thing here is that we trusted prior management to not put us in the position we are now.

[graham1ty] 21/10/2021 08:09

Reading again, They are suggesting the problem is “defaulted receivables”. That is where someone has defaulted, the asset is seized, and sold, yet that still does not cover the loan. Really ? Really ?

That would make the claim of “asset backed” loans absolutely untrue ? Surely the loan to value ratio would have always been at a level that if the client defaulted, collection came by seizing the asset ? Which had a residual value of greater than the loan amount outstanding ? Surely, only in very, very occasional circumstances would the underlying asset ( whether car, truck, machinery) have a “forced sale” value substantially below the loan amount ? But £6m ????

And, if this extra £6m is just about “defaulted receivables”, what about continuing impairment levels ? Or am I misreading this ?