Pcf Share Discussion Threads

[topvest] 03/1/2022 20:12

Looking at the accounts £165.3m of their financial liabilities (including retail deposits) have already matured by 30 Sep 2021 versus £107m on the financial asset side, so with no new retail deposits coming in they have a very serious cash flow problem in my view. Same old story with banks: funded shorter term than its customer loans and so if the financing or retail deposits dry-up they have a major problem.

Personally, I would never deposit any cash into a dodgy bank FSCS guarantee or not.

[123davidgwilym] 03/1/2022 19:26

I follow this thread with great interest, and am very impressed by the quality of the discussion.
I still don’t understand what happened, and expect I will not until the 2021 results are published.
Scott and Robert were highly experienced and had dealt with many issues over the years. I always had the greatest confidence in their integrity. I doubt they were responsible and think the business is diminished without them.
I have my own ideas what went wrong, some of which have been ably set out in this thread, but it would be speculation at the moment.

[dandigirl] 03/1/2022 18:21

hippo, you missed me! How nice!

Happy New Year to you and all who post here - or are just interested watchers.

Let the fun really begin later this month. Let us look forward to the AGM; it is to be hoped that a physical meeting can be held where the Board - with or without Franklin - can be confronted.

However, lest I am considered as too glib, you should know that we, too, do have quite a lot of PCF shares, which were worth quite a lot of money, and we will suffer considerable pain and loss like all others. Our thoughts go out especially to the Reverend and his flock; he will have had a trying Christmas and like the rest of us be hoping for some clarity sooner rather than later.

From reading recent posts, it appears that thoughts are broadly aligned.

As I have posted, I too subscribe to the notion that all this has been somewhat overdone. However, the origins start with the failure to report accurately. This is seen as a heinous crime by the regulator. It is this that is likely to lead to a fine from the FCA later rather than sooner IMV. Such behaviour is not allowed, ever. And everything else followed from this failure.

It was this that did for young Maybury. Chairmen just love to have an opportunity to remove a CEO. It must make them feel very macho, more manly. Recent history is littered with examples, Stephen Hester, Rana Talwar, Martin Taylor and Malcolm Williamson are the sort of names that come to mind. Some deserved to go, others didn’t. In fairness, though, it was action that Franklin had to take. He would have been viewed in a bad light, had he not done the deed.

BTW, does anybody know if Mr Maybury is still here or has he skedaddled back to Aus?

I don’t think we should get fixated on the 2020 numbers. They are way out of date and a lot has happened since. We wait to learn whether or not the cure is worse than the disease.

topvest, I don’t think we should worry unduly about a run on the bank for a whole bunch of reasons. As has already been posted, funds raised are for fixed periods and cannot be withdrawn overnight. Secondly, there is the FSCS guarantee up to £85k to comfort depositors. Thirdly, the banking licence would have been suspended by now although it is not clear why PCF has stopped taking retail funds. Fourthly, PCF appear to have access to wholesale finds in case of need. Then there is the BoE as a provider of last resort. And the business now appears to be closely managed on both sides of the balance sheet in the full glare of oversight by the regulators. PCF will be on a watch-list and required to provide very frequent updates.

Because of the FSCS support, we would place funds with PCF in a heart beat if the rate is acceptable.

I think I have changed my mind regarding a SOMERS buy-out. I think every effort is being made to retain the listing. It cost a lot of money to become a bank; the quote is of value and something not to be given up lightly. Moreover, private equity is always looking for an exit; the listing provides one such. Without it, SOMERS options to off-load/reduce are limited to a third-party sale only. If the RI is underwritten only by SOMERS then there is indeed a risk that the SOMERS shareholding becomes too large. But there is some leeway, isn’t there? Could it not increase to a higher percentage - 80%? - and retain the listing. And much depends on whether the other shareholders stump up?

If the prospectus looks okay, we will.

Finally, I think a very big and bright light should be shone on GT as the IA. I hope that SOMERS are all over this with their legals. If we had the wherewithal, that is where we would begin.

[seasidehippo] 03/1/2022 13:43

Just need Dandigirl to comment now for a full house!! Lol

[topvest] 03/1/2022 12:18

I am sure that Somers are very unhappy with the situation. Its interesting that both parties have said virtually nothing on the matter in both the UIL and Somers annual reports or Q4 releases. Any fundraising will likely see Somers take full control in my view as they would need to underwrite an equity raise and that would likely lead to PCF being delisted.

[topvest] 03/1/2022 12:11

For what its worth, I think that Somers will tidy this up or merge it with Resimac, subject to their not being a run on retail deposit withdrawals. If they don't get new retail deposits whilst maturing deposits are switched-out, that would mark the end of PCF Group as the financing requirement would be too high.

[hopespr1ngseternal] 03/1/2022 03:15

cjd: I suppose my question is where is it stated that his original title was Head of Transformation.

[hopespr1ngseternal] 02/1/2022 22:15

According to the RNS of 9th December 2020 Garry Stran was originally hired as COO designate in July 2020.

[graham1ty] 02/1/2022 13:47

Why is he still Interim Chief Executive ? An acknowledgement he is not up to it ? If he is the one to lead the team ( in the Conclusion it reads "I am proud to be leading the PCF team towards a brighter future" and above that "our remediation plan....will take a further 18-24 months".

Your team ? Not yet mate.....and the RNS refers to "Strengthen the....Change functions". Was that not his role ?

Next job, which I have not done as it is Christmas, is compare the recent RNS with the Dec 2020 RNS. What has been restated ? But also check what has been restated for 2018 and 2019. We were told these were the years of regulatory breaches, so presumably restated. Yet from two weeks ago RNS you would not know that. There is a tiny asterisk on 2019 p&l that refers to impairments, but it does not say anywhere in big bold letters that they have been restated. And there is no such asterisk on the balance sheet......so how has that not been restated if the P&l has ?

I've not had the time or energy to do all the comparative. Next week will try to summarise what has actually changed......happy new year.....

[cjd190573] 02/1/2022 10:03

Graham - totally! Just remember what Gary Stran’s role was before his interim appointment ‘Head Of Transformation’; was it not? So what exactly was this project of ‘transformation’ all supposedly about and what exactly was he doing in the six month run up to suspension? Was it the customer experience, On-line experience, expansion, product development, branding, diversification - No! Could this whole scennario be what the transformation has been leading up to insofar as a new board, a new auditor, a new finance team, new chair, new culture, new regime - new governance all bought about by design and not default, with incompetence and blame being the catalyst, which let’s face it, is only what we have only really heard about. The question is who ultimately orchestrated it?

[graham1ty] 02/1/2022 08:46

One of my fears (and hopes) is that it never was a bad as suggested. They got a banking license, with significant scrutiny. David Bull was (we thought) highly regarded and experienced.

There is a possibility (careful I do not libel anyone) that the new CEO and FD are not the right people to take this forward. It is possible that the new broom has created many of the problems themselves? I can imagine new people wanting to impose "their way" on PCF, and changing everything, even if it did not need changing. We all know that accounting rules can be interpreted many ways, and a new auditor, or FD, could insist on a completely different approach, even if the old approach was not fundamentally flawed. Creating a whole disaster zone, when actually, a slight tightening up of the original system would have been sufficient.

We all know CEOs/FDs who like to flex their muscles, show off, justify their salaries, enjoy crying wolf, and want to come out of a process as heroes for fixing something......that may not have been fundamentally broken.

And if those very people are out of their depth, pedantic, slow or incompetent, even the process of change can take months and months, and not necessarily improve matters. It is tempting to think that a super confident and competent team could have sorted this out months and months ago......I wonder if Scott, Somers, etc are not shouting "what have you done to our business ?".

My point? Is there a chance that the significant problem lies with the new team, not the old ? What reassurance do we have that the new CEO and FD are "best in class"? Their Interim/Board status took months to resolve......are they the ones we want to take this forward ? We just do not know. Is there a possibility we have had a period of mind boggling incompetence, now have new systems we never fundamentally needed, and are led by the wrong people?

Just Sunday morning speculation ......and none of us know the answer......

[dandigirl] 01/1/2022 17:55

hippo: around 6 is the norm.

Guessing: That would have cost somewhere in the region of £150k to £200k.

Forward audit plans are agreed annually with the Audit Committee.

Not all aspects of the business are audited every year. Most should not need it.

Financial Controls and Regulatory Reporting were audited by GT in 2019 with, it seems, no significant issues unearthed by them. It is to be expected, given their experience, that GT would have known which information is required for such an audit. Were they given it all? Was it accurate? If not, why?

The full annual report for 2020 now refers to errors and mis-statements in reporting between Dec 18 and June 19. Why were these not picked up by GT, I wonder?

Regulatory reporting should be a piece of cake with the right software and a couple of bodies familiar with reporting requirements and procedures. It should not have needed to be audited again for a while.

We have not been informed which audits were undertaken in 2020.

The spotlight remains firmly on the Audit Committee and GT, as the IA.

SOMERS ought to be asking for some important disclosures.

[seasidehippo] 31/12/2021 17:03

I didnt know whether to laugh or cry when i read the paragraph about the Internal Audit Service!! Are only 6 internal audits in the year appropriate for a company of this size and nature?
Are those Audit opinions a little dated now?. I couldnt see where it said whether or not the controls at the heart of the problems were audited or even included in the internal audit plan to be covered in futute years because they were deemed to be of lower risk!!! Did this years Turkey have more than one Parson's Nose?

[seasidehippo] 31/12/2021 17:02

I didnt know whether to laugh or cry when i read the paragraph about the Internal Audit Service!! Are only 6 internal audits in the year appropriate for a company of this size and nature?
Are those Audit opinions a little dated now?. I couldnt see where it said whether or not the controls at the heart of the problems were audited or even included in the internal audit plan to be covered in futute years because they were deemed to be of lower risk!!! Did this years Turkey have more than one Parson's Nose?

[hopespr1ngseternal] 31/12/2021 13:45

i don't know about the Parson's Nose but the 2020 annual report was surely a Curate's Egg. The numbers, apart from the impairments, seemed generally good with operating income up 15% to 26.7m, PBT (excluding impairments) up slightly to 11.4m, very significant growth in the net loan book to 427m from 339m (including 272m of new business versus 276m in 2019). Future strategy is promising with the CEO stating that once our planned remedial actions have been completed we will be well placed to return to a strategy of controlled and prudent growth. The bad were of course the impairments and the disclosure predicted by Dandi that the company would need to raise capital. Also disturbing to note that funding is not truly diversified: the vast bulk of funding 300m+ comes from the retail market with the balance in the form of Term Funding from the BofE. There is a 25m facility with Nat West but no other bank financing to speak of at the moment. The ugly is the disclaimer of audit opinion by EY. the implications of which I am simply not qualified to explore.

It has now become relatively clear that the operational capability was not in place to support the toll taken on the resources of the business by the combined effect of rapid growth and conversion to a bank with the highly onerous regulation that goes with it. Not an unprecedented phenomenon.

The key to the group's survival and subsequent prosperity obviously depends on the willingness of Somers to inject more capital into the business. Why would they not? It is an excellent business which tried to run before it could walk. We were all assuming that since May 2021 Somers has been fully aware of what is going on and I am inclined to assume (albeit without evidence) that the expressions of confidence in the Annual Report reflect positive vibes from Somers. I have in mind the statement in the Stakeholder Engagement Report that the Board are confident that our proven business model will deliver once again an attractive return on equity in the medium to long term and the statment that I cannot immediately locate that once remediation is complete PCF will be unrecognisable.

It remains my view that the biggest concern for the minority shareholders is that Somers will try to take us out on the cheap. Nothing to suggest that they will but it is clearly a possibility against which we must be on guard.

I have just seen that Dandi has posted. I have not yet read her post - wanted to get this out first.

[dandigirl] 31/12/2021 13:30

hopes: your 3733. My tuppence worth - we have a snap shot of figures that are now 15 months out of date. They and the narrative surrounding them pretty much confirm the speculation on this board. The 03/21 interims if/when the Board get around to publishing them won’t add much, if anything, more.

We have affirmation of a huge failure of governance. Many of us invested because we liked the narrative as espoused by Maybury and Murray. The blame for the situation we are now in should start with them IMV. We then have regulatory and governance failure by the Board. They took too much on trust. Why wouldn’t they? Maybury and Murray built the business. EY were external audit. GT were internal audit. Both big names. Moreover, as per a previous post, GT had undertaken an internal audit of regulatory reporting in 2019 and found it okay.

This is not to exonerate Franklin and the Board, however. They should have questioned more than they did.

All that said, and to try to respond to the latter part of your post…

It seems to me that every effort is now being made to stabilise and re-establish the business in order that some of the bad things that could happen, will not. In particular, the lifting of the suspension. Unfortunately, it appears that it is no expense spared which will hit the bottom line both immediately and ongoing.

The one surprise to me and, I think, to others, is the time all this is taking. Far too long, IMV.

Finally to SOMERS, who must be as ticked off by this as the rest of us. I wouldn’t be surprised if they aren’t taking legal advice, especially as regards the role played by GT. Outsourced Internal Audit by the likes of GT is not cheap. All shareholders deserve better.

We should all ready ourselves for what will more than likely be a relatively significant capital raising. This is required to bolster the balance sheet for the associated losses and costs but also to enable economies of scale. The ongoing costs will be significant which require an increase in business to pay for them and more capital to enable this. Yes, it will take at least two years to show real progress in what is likely to be less certain market conditions.

We all will face a loss, I think. How big? - anyone’s guess. But we will have to decide whether or not to subscribe to the new business plan. I look forward to reading the prospectus in due course. January should be an interesting month. Sorry to be Eeyore’ish.

[hopespr1ngseternal] 31/12/2021 00:13

Millaree: although Marian Martin did not cover herself in glory I would want to know whether the outsourced internal auditors Grant Thornton did their job before passing judgment. And what was the Committee being told by the two finance directors prior to Richardson?

[hopespr1ngseternal] 31/12/2021 00:05

Graham: I don’t think you are being cynical at all. I think the conclusion is inescapable.

[graham1ty] 30/12/2021 12:39

Marian was on the Audit Committee.......

She goes, by Chair Christine, does not.....

[graham1ty] 30/12/2021 12:09

Also, shareholders must call up and get their accounts. I know HL does not send on accounts, even if you tick every box. Unless it is a "corporate action", accounts just do not get to shareholders these days, lost in the bottomless pit of nominee holdings.

Call up, get the accounts, and get a letter fromm yr nominee allowing you to attend and vote

[hopespr1ngseternal] 30/12/2021 10:16

Graham: I had the same problem. It’s in the second RNS

[graham1ty] 30/12/2021 08:56

On a quick, read again of the statement, I cannot refind the date of the EGM. Something like 4 Feb. This will be a crunch meeting, and Covid willing, a chance to eyeball the Board. The notice of meeting will (apparently) be sent with the Annual Report

[hopespr1ngseternal] 29/12/2021 23:04

This was a ‘Friday news dump’ in spades. On the face of it the absence of an audit opinion from EY is very troubling. Does it mean that PCF remains in breach of AIM rules - hence the rider that the LSE has full discretion to give dispensation from the rules. And what (if any) are the implications for the banking license? Way out of my depth. Anyone have any thoughts.