Pcf Share Discussion Threads

[graham1ty] 23/12/2021 08:36

P73, the start of less good news. From the going concern statement:
“The Group made a £(4.8) million statutory loss before tax in the year. The Board has approved a medium-term plan in which the Group returns to profitability, but this is dependent on building scale to support an increased cost base. Remediation costs are expected to be incurred for at least the next twelve months. The growth in the medium-term plan requires capital to be raised“

[graham1ty] 23/12/2021 08:02

Still cannot find anything substantial about current trading. There seems to be an underlying assumption that the suspension will be lifted, at some stage. And therefore, presumably, that there is some residual value for shareholders.

It would be nice to have had some rough statement whether the year to Sept 2021 was profitable ( prior to impairments ) and whether PCF is currently trading profitably ( after the kitchen sink has been thrown in)

Still clear as mud

[graham1ty] 23/12/2021 07:58

And that goes on:
“Given the potential wider consequences of this on our audit, we sought to extend our procedures and presented a plan to the Audit Committee in July 2021. We were unable to complete our audit for the following reasons:
l Management was unable to provide sufficient and appropriate audit evidence in response to our extended testing requests.
l The Board of Directors resolved in July 2021 that management should only continue to provide us with the information necessary for us to issue a disclaimer of opinion on these financial statements.
For the same reasons as set out above, we were also unable to complete audit procedures over reclassifications as described in note 1.9 to the financial statements.“

So this audit is effectively done by the Board. They were unable, and then unwilling, to supply audit evidence. So, no auditors opinion.....unbelievable

[graham1ty] 23/12/2021 07:57

P66, hidden away in the auditors opinion, the F word:
“The independent forensic investigation identified certain manual adjustments made by the Group for internal management, financial and regulatory reporting purposes. We concluded that certain of these matters were indicators of fraud.”

Not mentioned anywhere else that I can see

[graham1ty] 23/12/2021 07:55

P53, there will be an EGM to approve the accounts. Notice to be included with the Annual Report. Should be fireworks

[graham1ty] 23/12/2021 07:51

Buck passing onto E&Y (p45):
“During the year, ARC discussed with EY the review procedures they have in place to ensure audit quality. There was also a discussion of EY’s firm level results of their Financial Reporting Council (‘FRC’) 2020 Audit Quality Inspection, the impact of the findings on the audit plan and any matters relevant to the execution of the Group’s audit.“

[graham1ty] 23/12/2021 07:48

The Company 7nable to provide enough information to the auditors, but decided to plough on anyway (p43 Annual Report):
“Also, given turnover in the finance team and the past poor record keeping, it wasn’t clear that the Group would be able to provide the level of detailed information needed by EY for an unmodified audit opinion. Lastly the additional assurance work would further the extended time period to finalise the Annual Report & Financial Statements 2020 and would further increase audit costs.
In the circumstances, management recommended to the Audit Committee and the Board that it was in the best interests of the Group to proceed with the audit work so far as was necessary for a disclaimer of opinion on the financial statements for the year. This recommendation meant; 1) The finance function would no longer provide the substantial amount of additional audit evidence requested and 2) It was solely for the Board to reach a view on whether the Group Annual Report & Financial Statements were free from material misstatement, in order to prevent further additional delays in presenting these financial statements to stakeholders. The Audit Committee supported this pragmatic recommendation.̶0;

[graham1ty] 23/12/2021 07:43

Trying to dig out more detail. In the Audit Committee Report, this:
“l The Audit and Risk Committee (‘ARC’) which held
its final meeting on 15 May 2020.
l The Board Audit Committee, which held its first meeting on 10 September 2020.”

They split the Audit and Risk Committee into two different bodies. Fine. BUT, the new Audit Committee did not meet (apparently) for FOUR months.

I fail to see what the head of the Audit Committee has not resigned

[graham1ty] 23/12/2021 07:22

Only a quick first skim. No resignations. Nothing on current trading. No hint when half year results will be out. Suspension update end Jan. Remediation plan will take another 18-24 months ( Why ??????).

And, on a first read, very little on why, why, why this has taken so long.

Oh yes, looks like Ernst & Young not going to give an opinion in the audit report. And then resign......

[geraldus] 23/12/2021 07:10

Looks like one small step this morning.

[dandigirl] 22/12/2021 07:43

Saw the fines levied on StanChart a few days ago and Metro this a.m.

Surely something must be coming for PCF albeit reduced for the confession.

[graham1ty] 20/12/2021 22:08

I find it inconceivable there will not be some Circular with the announcement. And then a vote, approving the accounts or whatever restructuring or fund raising is required.

Trading would start after that vote, presumably an EGM. So, even if an announcement tomorrow (🙏) I would not expect trading to start for three weeks ( and allowing for bank holidays that will actually be a month)

[georgelees] 20/12/2021 16:05

"A further announcement regarding these [March 2021] results will be made in due course"

- can't see how they can do that until they have the 2020 ones out of the way.

[georgelees] 20/12/2021 16:03

You are probably right I am used to being disappointed. I was thinking they might want to surprise on the upside for once!

"-- The finalisation of the Assessment will be shortly after publication of 2020
annual report and accounts.

-- The publication of the 2020 annual report and accounts is expected to be late
December / early January.

-- The publication of the interim results to 31 March 2021 is expected to be as soon
as possible following the filing of the 2020 annual report and accounts. A further
announcement regarding these results will be made in due course."

Would we expect them to effectively all be at once and the trading to start immediately after? Or would you expect them to be staggered?

Presumably just a guess.

[seasidehippo] 20/12/2021 15:38

Dream on!! My guess, for what its worth, is 2nd or 3rd week in January.

[georgelees] 20/12/2021 11:24

In my book this is now definitely 'late December'.....

[hopespr1ngseternal] 17/12/2021 00:19

Graham: thank you for your excellent forensic work. My only qualification would be that the process and the paper trail you refer to cannot officially reflect unpublished information for obvious reasons.

[georgelees] 16/12/2021 13:43

Thanks, interesting. We are nearly entering the end of December. Lets hope they decide to over deliver for once and get it done before Christmas.

[dandigirl] 15/12/2021 15:16

G: Thank you for taking the trouble to do this. I, and I am sure others, appreciate what you have done. Excellent stuff.

[cc2014] 15/12/2021 11:33

Hi Graham,

I agree with everything you've written. For sure, Somers and UIL are audited by one of the big four and will have to have justified to the auditors satisfaction the valuation of the investments.

From my personal point of view though this reflects everything that is wrong with the audit world. Somehow UIL have and KPMG have found some accounting rule that means they can value the stake is Somers at higher than they can sell it for in the open market. Of course the quoted price on the exchange is only one valuation method and we do not know the detail

Out of interest I looked up the NAV of Lloyds. It's 52.3p in the last set of accounts and LLOY is currently trading at 45.1p. Should investments trusts therefore use a figure higher than 45.1p in their books. I think not. It doesn't make sense, yet apparently that is allwowed under the accounting rules if the stock is illiquid, which again makes no sense to me as trying to shift a large stake in an illiquid stock can't usually be done at market price, but instead a lower one.


I'm drifting off topic though. The main point is that the value in the books of Somers for PCF has not been written down to some horrible number and therefore we some decent hope for shareholders that when the suspension is lifted the share price will not be destroyed. It would be nice to think we might see an RNS before the Xmas break

[graham1ty] 15/12/2021 09:56

CC, you can argue about what NAV really is. However, as a generalisation, proper audit firms, and quoted companies are meant to be making their best attempt at a valuation. You may argue that it is too high, or too low, but for the Company and the auditors, they will have gone through a process, with a paper trail, of how they got to that valuation.

Now, of course, the corporate world is littered with examples where valuations have been entirely wrong, through misguided assumptions, or straight fraud. But those should be the exception rather than the rule.

Somers are not audited by some Mickey Mouse auditor, but KPMG ( “Mickey Mouse, I hear a few cry” !!!!!). And, with PCF suspended, one has to assume they have asked specific questions about that valuation, and made the internal auditors and the Board of Somers justify maintaining that valuation.

Or so one would hope......

[cc2014] 15/12/2021 09:15

The Somers valuation I see as optimistic for all shareholders here. Good news indeed.


However, just a caveat so we have a full picture. The Somers/ICM/UIL/UEM interconnected web of companies plough their own furrow when it comes to valuation.

For example UTL who have 40% of their investments in Somers value Somers as follows. Extract from an RNS:

The Board of UIL Limited ("UIL" or the "Company") announces that the Company will move to valuing its investment in Somers Limited ("Somers") at its net asset value ("NAV"). This will lead to an increase in UIL's reported NAV. For example, had this valuation approach been adopted for UIL's NAV as at 28 June 2021, announced earlier today, the reported NAV of 395.11p per share would have increased to 435.09p per share.

The low level of transaction volume in Somers' shares led to UIL, earlier this year, moving away from valuing Somers at its share price to a valuation at a 15% discount to Somers' NAV. UIL also stated that it intended to reduce such discount later in the year. In light of accounting best practice and continuing low volumes in Somers' shares, it is therefore now considered appropriate to move to valuing UIL's investment in Somers at its underlying NAV and this will commence with UIL's NAV as at 29 June 2021, to be announced tomorrow."

Now, to my mind the investment should be valued at the value the Somers shares are trading at. Using a different higher number because the investment is trading at a discount to NAV to me is completely wrong. Their auditor must be quite accomodating. Very accomodating. I think the world would fall apart if every investment company went round valuing it's investments at higher than the price the investment is trading at. (especially with large stakes in illiquid companies)

[graham1ty] 15/12/2021 08:00

I think we have looked at the Somers valuation in previous quarters, so I may be repeating the historic valuations:
Q1 ( to Dec 31st as they have September y/e) PCF holding valued at $55.8m ( announced 11 Feb
Q2 (to Mar 31, announced 21 May) valued at $44.6
Q3 ( to June 30, announced 9 Aug) “written down” but no value disclosed
Q4 ( to end Sept, announced yesterday) valued at $37.5m