Pcf Share Discussion Threads

[cc2014] 24/12/2021 09:32

The question I'm asking myself this morning is what information is it that PCF cannot provide as evidence of the figures in the accounts?

It only really does one thing. Takes money off savers and lends it to borrowers.

So, are we saying PCF can't substantiate how much money is has lent to who? because the ledger which looks after that is a mess?

Which might if I'm stretching explain why the annual report suggests it will take another 12-24 months to sort out, because again if I'm stretchig more recent loan agreements are now being done correctly and poor quality records will over time become less and less.


My mind also turns to the business viability. We know it's not been taking savers deposits at all since the end of September and in the 3 months before that the rates offered were generally so poor that it's now 6 months since they've had any cash in from this. We also know from page 17 in the annual report that the £60m it's borrowed from the Treasury it's now at risk of having to repay early because the collateral provided against the loan is becoming of the wrong type due to Covid.

So, the business is shrinking every month as that's the best way to deal with the regulatory capital position. As the business shrinks though, economies of scale are lost, overheads have to be cut and that costs money.

Leading to a recapitilisation requirement of course, which can only come from Somers as no-one else would be interested with such a dominant shareholder. Somers have a choice. Put more money with the potential to get it back or just let it drift.

[cjd190573] 23/12/2021 21:39

Hi Topvest

It’s not that sort of bank though is it? A lot of depositors would have entered into long term fixed rate bonds (for example) when PCF were offering market leading rates back in March 2021 for 5-7 year products. The media have been remarkably, extremely, humongously quiet on the PCF front, even with enough ammunition to be quite damaging - but they haven’t. PCF have kept their banking licence throughout, and up until the end of September were still accepting deposits. This is just a small, specialised, not so well run asset backed challenger bank that needs a slapped bottom and boy have they had one! Let’s also face it, had this not been suspended, it would have been shorted down to piddly pence anyway like everything else in AIM. GLA everyone for 2022.

[topvest] 23/12/2021 19:59

One other concern is going concern where multiple uncertainties are raised in note 1.2 , but not in the audit opinion. Its an absolutely rubbish audit opinion from EY as it really doesn't tell the story. Surely it should reference the material uncertainties on going concern rather than just disclaiming after clocking up £860k (with no doubt more to come)!? They will no doubt point to Auditing Standards and the fact that they are disclaiming, but any good audit opinion would reference going concern in this situation.

Actually, the risks are higher given the need for additional funding. There could well be a run on the bank (i.e. the retail deposits) given its situation and that would be game over! It would be interested to know what the retail deposits number is today. Surely, maturing cash deposits are going to exit if there is any adverse media coverage?

[graham1ty] 23/12/2021 18:43

Sorry, yes, stupid of me. I did know that

[hopespr1ngseternal] 23/12/2021 18:26

Dandi: you called. I am following with interest and will post as soon as I have managed to collect my thoughts. You were certainly right about capital constraints.

[cc2014] 23/12/2021 18:19

Hi Graham. I've posted several times before but I tend to refer to it as UTL as that's the tickerUIL is an IT. 40% of the fund is in SomersAll a tortuous web with common pools of directors with ICM

[dandigirl] 23/12/2021 18:18

I have had a little looksee at the Report.
We all take different things of interest to us from it - and there are lots of little nuggets of interesting information.
I took a particular interest in Internal Audit where IMV there has been a massive failure to whistle blow. Throughout these shenanigans I had wondered why IA had not picked up on any of this.

In the Audit and Risk Committee Report, p40, it reads:

""The Board has outsourced its internal audit function to Grant Thornton. The ARC/BAC is responsible for agreeing and overseeing the internal audit plan. Grant Thornton completed six internal audits during the year and their overall assessment was that, based on their internal audit work over the twelve months to 18 November 2020, one report was rated Needs Improvement, one report was rated Some Improvement Required, two reports were rated Satisfactory and two reports were Unrated, in relation to the work performed, Grant Thornton stated that, ’the governance and risk and control framework is operating effectively to support PCF Group in adhering to its agreed risk appetite’. This view was based on the work performed in the preceding twelve months"".

Consequently, I thought I would look at the same Report for 2019. On page 30, it reads:

""Internal audit - The audit reports completed by Grant Thornton this year covered Senior Manager and Certification Review (‘SMCR’), IT General Controls, Disaster Recovery Planning and Crisis Management, Third Party Management, Financial
Controls and Regulatory Reporting. Management has already implemented a number of the recommendations made, with timely plans in place to address those remaining"".

There would have been follow-up by GT to ensure their recommendations were complied with. The RNS of 28/06 refers to Errors and Omissions in Regulatory Reporting between December 2018 and June 2019.

So, not so very long ago, GT as Internal Auditors reviewed Financial Controls and Regulatory Reporting and did not observe any of the issues that have now seen the light of day. Looks to me that the IA function cannot be trusted and needs to be overhauled.

A second aspect of interest to me was capital and funding so I went looking. On page 105, there is mention of a 10 years loan facility from the British Business Bank at 8%!! fixed. Why pay 8% when there were cheaper funds available? - because it meets the conditions for Tier 2 capital. So, to a degree, capital has been reinforced by this facility.

There is mention of other bank loans in Note 21.

Note 22 shows a big jump in retail deposits from £267m to £342m for the period. It will be interesting to see the figures for 2021.

Overall, it can be concluded that Franklin and his Board were not up to the task of running a bank. We are all having to pay a big price for their shortcomings.

Shame on those involved with the mis-reporting to the Regulators. I hope that if the Bank is fined, the individuals will be fined personally too and barred from future office.

I also tend to agree with the view that this could have been handled much, much better and discretely in-house. It has been an exercise in bottom covering at enormous cost to shareholders with more costs to come.

Stand by for a significant rights issue and it is to be hoped that SOMERS and the other large shareholders support it.

and finally, hopes, where are you? Springing eternally?

[graham1ty] 23/12/2021 18:02

UIL ??? Where do they fit in........

[georgelees] 23/12/2021 18:01

Removing E&Y is a good thing. They would have accounted it to death.

[topvest] 23/12/2021 17:51

Well progress is being made. What seems to have happened is that the investigations identified possible fraudulent adjustments. At this stage big 4 risk management goes into overdrive. I suspect EY requested an enormous level of work going back years to establish that all adjustments had been identified. This probably would have taken years and so the board resorted to getting EY to sign a disclaimer so that they could get the accounts out. This means they will have qualified accounts for at least the next 2 years given the limitations of scope on the opening balance sheet. Moving to a smaller firm is a good way forward and they should now catch-up over the next 3 months or so in my view. With UIL holding a majority stake it’s probably going to pull through and might be a buy when the sellers have exited post resumption of trading. I just have an exposure through UIL now.

[georgelees] 23/12/2021 17:09

Reading that - updating a FPPP can be routeen - presumably the report into controls etc, will form part of the update. So of itself that is not perhaps a new concern.

[cc2014] 23/12/2021 16:00

What is an FPPP?

Introduction
Completion of a board memorandum (Memo) on the Financial Position and
Prospects Procedures (FPPP) of an applicant is a crucial part of London’s IPO
process. Directors of applicants to either the AIM Market or Main Market of
the London Stock Exchange (LSE) are responsible for ensuring that they have
established procedures which provide a reasonable basis for them to make
proper judgements on an ongoing basis.
Essentially this means that the directors, including NEDs, must ensure that the
FPPP includes procedures for establishing and reporting the company’s
financial position and prospects are appropriate for a London public company.

[georgelees] 23/12/2021 15:39

Yes Graham, I fear you are right. They do seem to have slipped since the last RNS. It now looks like "end of January 2022" at the earliest?
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
"Moreover, we are in the process of updating our
Financial Position and Prospects Procedures
memorandum (‘FPPP’) which will be completed
following publication of this Annual Report & Financial
Statements.

Following publication of this Annual Report & Financial
Statements, we will further communicate progress in
lifting the suspension of trading in the Group’s shares
once we have more certainty on its timing towards the
end of January 2022."

[graham1ty] 23/12/2021 15:29

GeorgeLees you are over optimistic. They have promised “a further update in due course” on the suspension and interims. In the Chairman’s statement they suggest that this will be “once we have more certainty on its timing, towards the end of January”.

It ain’t going to be “shortly after”.......

[georgelees] 23/12/2021 15:19

"-- 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."

Was what we were told last time - so:

They have stuck to the timetable for the 2020 Accounts. "shortly after" now.
We await the 'assessment' and 'interim results' ASAP

[graham1ty] 23/12/2021 15:16

Tim Franklin, paid £90,000 in 2018 and £95,000 in 2019. How much of this will be recouped ? With his pay for 2020 and 2021 amounting probably to £400,000, how much will he return to shareholders ?

Chair of the Audit Committee was not a volunteer role for Christine Higgins. Paid £51,000 in 2018 and £57,000 in 2019. Again, add in the last two years, and Higgins has been paid about £250,000 to preside over this complete car crash.

I hope she feels this should be returned to shareholders

[graham1ty] 23/12/2021 14:25

Chair of Audit Committee, Christine Higgins still in post.

Other members: David Morgan, but he has a massive conflict of interest in that he is a Somers Director also, and their representative on the Board.

Marian Martin resigns, having been appointed in July 2019. So, she gets to approve ONE audit only, to Sept 2019. And the period where the trouble starts ( the year beginning Oct 2019) starts just three months after her appointment. I am not suggesting is all her fault, however, it does feel like the newcomer falling on her sword......she is quoted as having “deep expertise in risk related matters”, yet appears to have joined the Board with insufficient evaluation of the risk that their accounts might be a fiction..........

[georgelees] 23/12/2021 14:25

"PCF's shares remain suspended from trading and it will provide a further update in due course on this and the publication of the half-year results for the six months ending 31 March 2021."

What does that mean? They should have that now, normally it would have been in June? Could that announcement be imminent? Would they start trading before the 2021 Accounts are done - which normally they would have a bit more time.

Good they have got the 2020 ones out of the way, but this whole process seems to be worse than the original mistakes.

[graham1ty] 23/12/2021 13:19

Well, two heads roll......

The right heads ????

Tim Franklin.....Royal Mail....PCF.....makes his cv fractionally less attractive.....

[cc2014] 23/12/2021 12:09

At 30 September 2020, the gross carrying amount of exposures with forbearance measures was £40.4 million (30 September 2019: £nil). This relates to 1,711 agreements in forbearance which are COVID-19 related, with temporary modifications to terms and conditions. As at 30 September 2020, there are no loans that have had a
refinancing or permanent modification to terms and conditions. COVID-19 related concession does not in itself constitute a significant increase in credit risk

In terms of executive director changes during the year, the committee considered and approved the terms DavidBull settlement package during the year when he resigned as a director on 16 March 2020 and left the Company’s employment on 30 September 2020

[graham1ty] 23/12/2021 10:08

CC, the audit will have started shortly after the December announcement of the Prelims. It must have been during the audit process anomalies turned up, the Azule disclosure was discovered, and at that point ( after suspension) the new FD cleaned out the whole finance department ( presumably some fired, some resigned some realised time to jump). So, I think it was MID audit that the problems started. The new team picked up a whole lot of work, and they had no clue where it came from and how to verify any of it.......

[seasidehippo] 23/12/2021 09:52

Desperate but not terminal. There is a pulse and they do at least refer to lifting suspension. Clearly E&Y were our "Parsons nose"

[cc2014] 23/12/2021 09:29

Not sure where to start or what to say.

The Board agreed with the auditors in July that they weren't going to persue getting the accounts audited, yet shareholders were not informed.

However, we do now have some grasp of what went wrong. These are my words, my interpretation, others may see things differently. It appears the whole finance team had left before the audit process started. Not a coincidence imho. They knew the prime accounting records were inadequate and wanted no part of it. Self preseravtion. Of course some of them would have been responsible for the mess, although accounting is not hard if the right IT systems are in place which it seems they weren't. The new finance team couldn't make sense of it all, probably handover was inadequate, probably the new finance staff were warned by the leaving staff to get out as well.

From there it completely unravels because the new finance staff can't provide substantiation to the auditors. And that's the crux of it. Even after KPMG were brought in to do a complete review PCF still can't produce audited accounts. What a mess. A bank that after 15 months cannot get its accounts audited.

[rmillaree] 23/12/2021 09:10

"Still cannot find anything substantial about current trading"
Agreed and with regard to outlook they do comment - simply to say thats they won't comment !

"the Board does not believe that it is appropriate to provide firm guidance on future performance."