Teliti Share Discussion Threads

[stemis] 25/1/2007 10:11

Blimey it just get worse!

Statement re suspension



Since the announcement on 22 January, it has emerged that the losses for the
year ended 31 July 2006 might be as much as £2.2m, including trading losses of
£1.4m.

Both new non executives have resigned claiming "they were misinformed by the Company of its financial position and prospects at the time of their appointment"

PKF investigating the financial position.

Hard to see TEL surviving. Competitors will consider it better to pick off the bits they want from the receiver.

I can only believe that there has been a huge fraudulent misstatement of the company's accounts. Even the most incompetent couldn't get their accounts that far out.

An amazing and bizarre end to this soap opera. Thankfully I'm out and by the tone on this board most of the regulars are too. Sorry for those who held on.

[blindfaith2] 25/1/2007 10:11

Regulatory Announcement

Go to market news section

Company Telephone Maintenance Group PLC
TIDM TEL
Headline Statement re. Suspension
Released 10:00 25-Jan-07
Number 1201Q



RNS Announcement for release on 25 January 2007

Telephone Maintenance Group Plc


TMG announced on 22 January 2007 that, whilst the audit has not been completed and the Company has not announced the results for the year ended 31 July 2006, TMG will report a loss expected to be in the region of £1million for that year.



On 19th October 2006 TMG announced a placing which raised £750,000 to provide additional working capital to fund TMG's enlarged operations after completion of recent acquisitions. The Company also confirmed that trading was "broadly in line with expectations" and that "the Board expected be in a position to begin the payment of dividends during the current year.". In addition, TMG announced the appointment of Frank Lewis and Jim McLaughlin as non-executive directors.



Since the announcement on 22 January, it has emerged that the losses for the year ended 31 July 2006 might be as much as £2.2m, including trading losses of £1.4m.In light of the expected level of losses and the disparity with the financial position as it was believed by the Directors to be on 19 October 2006 the Board has requested an immediate suspension of the quotation on AIM of the Company's shares pending clarification of the Company's financial position.



Mr Lewis and Mr McLaughlin consider they were misinformed by the Company of its financial position and prospects at the time of their appointment and have resigned as directors with immediate effect.



Corporate Synergy Plc has requested accountants PKF to investigate the position and will decide on its course of action in the light of their report.



Enquiries:



Jeff Williams, Managing Director,


Telephone Maintenance Group Plc
01527 881812


07930 355873




John Wakefield, Director


Corporate Synergy Plc
0117 9330020

[blindfaith2] 25/1/2007 10:08

Game over then !

[kimboy2] 24/1/2007 22:46

Well I have drawn a good few conclusions and the results will just fill in the details as far as I am concerned. They will ceretainly be interesting, and thankfully only an academic interest.

Still very surprised that the share price didn't move for so long. It almost felt like insider trading selling them.

[renixus1] 24/1/2007 20:03

...not drawing any conclusions just yet, just waiting to get my hands on the accounts (all will be revealed). I take it the CEO is still not taking or returning any calls?

[blank frank] 23/1/2007 20:41

Renixus1,

It's perhaps understandable that people should overreact at a time like this. However, I wouldn't necessarily see a big goodwill write-down as horrific. Remember that all goodwill has to be written off eventually anyway, and if this approach has been accelerated it will reduce the impact for the current year etc. (hence my previous reference to a 'big bath' approach) - TEL may have been relatively happy to go along with it. It doesn't necessarily imply anything disastrous at the companies concerned.

From speaking to the company I believe that TEL monitor their acquisitions for quite some time before making them, to avoid buying a liability.

As regards the company heading for the grave: we know that at least a quarter of the £1M. loss is a paper one, and that proportion is probably far higher. TEL raised over a million pounds in October through the issue of equity. I suggest that we wait for the results before jumping to hasty conculsions.

B.F.

[renixus1] 23/1/2007 20:09

Just looking back through previous RNS, the amount paid for the Westcom acquisition was significantly higher then the net asset value. I'd imagine the accountants put pressure on them to justify the goodwill (difference between fair value of net assets and price paid) in a rapidly changing market place and the only justification they probably had was the price they forked out based on past profits with poor visibility at best on future revenues. Even more horrific, might be the fact that they did very little due diligence on these acquisitions, numbers mentioned in the RNS's were only draft - let's hope they didn't just buy something based on a dirty spreadsheet put together by the seller. Looking forward to seeing the accounts, hoping to see a goodwill write-off (prudent accounting), dreading to see unforeseen trading losses (company probably heading for the grave).

[blank frank] 23/1/2007 19:01

TEL's current market capitalisation at its mid price of 48.5p is c. £2.46M. (5,076,758 shares in issue).

Interim turnover for the half year to 31.1.06 was £2.709M. Second half turnover should be higher because of a fuller contribution from the Westcom acquisition, and organic growth. Perhaps c. £6M. for the year end 31.7.06 - we should know very soon. (And turnover for the current half year to 31.1.07 should also show a half-on-half increase, because of the Datatel acquisition, and organic growth.)

TEL's acquisitions suggest that a valuation of about one times sales is reasonable for this type of company. At £6M. that would be £1.18 per TEL share.

Even after the £1M. loss, the company should still have net assets of c. £1.5M. (including intangibles), in view of the c. £1.1M. net (after the Datatel payment) raised in October through the issue of equity. And hopefully net debt will still be fairly modest - significantly less than before the October fundraising I would think.

In addition, it will have tax losses of c. £3M., which could save nearly £1M. in tax later.

TEL's largest value though should reside in the value of its actual business: its many contacts with clients, including blue chips, with a good proportion of recurring revenue; and its skilled staff - probably numbering over eighty now.

MAI's current market capitalisation at its mid price of 204p is c. £25.41M. (12,456,800 shares in issue), just over ten times TEL's; its interim turnover to 30.6.06 was £7.063M.

If TEL is taken over soon, I would therefore hope that it is at a very significant premium to the current share price.

Alternatively, if the company isn't acquired, I would still hope for a share price recovery.

If current trading is good - and there has been no word to the contrary - a significant profit for the current year to 31.7.07 is possible.

B.F.

[blank frank] 23/1/2007 18:04

Blindfaith2 - 23 Jan'07 - 14:27 - 171 of 171
" ... Blank >- You remain in creditably quite today and I recall you posting previously that you knew these character and wonder if you have any news as to what this is all about ? ... "

I rarely ever post before the late afternoon, and did make three posts yesterday evening following yesterday's news.

I have personally met TEL's CEO Jeff Williams, and Greg Hallett, and I feel that they are both very able, honest, and pleasant.

The following are a few more thoughts I have, though I should say are speculation on my part. The fact that this news has come nearly six months after the year end suggests to me that a lot of the loss could be non-trading in nature. E.g. exceptional items that Greg was hoping to exclude from the headline profit/loss figure, or even book to the balance sheet. Then at a late stage the auditors ruled that they would not allow it.

If that is the case, the net assets will be reduced, but the impact upon debt could be far less. With the monies raised in October, when debt was reduced by over a million pounds, the company's position on that score should still be better than before the fundraising. The loss may effectively be largely a 'paper' one.

I would imagine that the company announced the news to the market as soon as they were aware of it, as they should do. That would explain the relatively short and terse nature of the announcement. There was nothing in the share price to suggest that bad news had leaked out in advance.

B.F.

[blindfaith2] 23/1/2007 14:27

I've just called TEL to try and speak to Mr Williams but surprisingly he is apparently out of the office today and his mobile is switched to voicemail.

I was told by a cheerful lady who answered the phone that the accounts would be out this week but a little of that cheer slipped away when I said I was calling not about the accounts but to speak to Mr Williams.

Blank >- You remain in creditably quite today and I recall you posting previously that you knew these character and wonder if you have any news as to what this is all about ?

[kimboy2] 23/1/2007 12:52

Seems to have been sod all selling as well. Anbody any idea why.

I also wasn't totally convinced in the statement about getting the accounts out by 31st january. Wouldn't surprise me to see it suspended next week.

[randsys] 23/1/2007 10:49

Bought these at 63p months back and then sold them at 72p just before xmas.
Never felt comfortable with this share, something just didn't seem quite right but could never put a finger on it. Have been following since just to see if I had made a mistake in selling too early. And the massive spread was always a pain in the butt! Looks like I was lucky in getting out, but echo previous comments.

However with the VoIP market getting ever more diluted I wouldn't be confident in the management being able to turn this around in the short term. Probably better to take the hit now and invest elsewhere (IMHO). Have a look at ASM, LOQ, APN, IXE, RCG, COT, SYNC, NTA, VIY, CRA, SOLA for possible investments. No ramping here, just highlighting some stocks you may not be aware of. As always, DYOR etc.

[blindfaith2] 23/1/2007 10:32

As a reminder, taken from June 2006 TEL's Shareholder News

Jeff Williams wrote:


"As CEO I would like to emphasise to you our shareholders the underlying strength of the company, which is our substantial, contracted revenue."

"It is pleasing to report the Company's continued success in 2006 and our ability to compete, win and retain clients in a rapidly changing voice and data UK market, centered on voice over internet protocol (VoIP)"

"In closing, I thank you, the shareholders for your support and look forward to updating you with further news on the Company and its success in the future"

This newsletter is dated June 06 and now, yesterday they report a £1M loss for the period ended one month after the date of this publication.

Dependant upon the full story then yes, one for the FSA if only to make Mr William's life a little uncomfortable as he must have known something ( and if he did'nt he should have )months before releasing this bomb shell.

[jonwig] 23/1/2007 09:44

Kimboy - important point you make about learning for the future. Some people just don't trust AIM shares, and that's it. But then some real gem-investments are missed, too. I'm nowhere near to writing a whole market off just from a handful of failures.

Pointers which formed my own opinions:

PLUS: the company appears to have blue-chip clients (well, household names) and is getting repear orders/contracts from them. So honest and above board ... surely?

PLUS: the Chairman, being a prominent Lib-Dem peer, could hardly be seen to associate himself with obvious scoundrels.

MINUS: they did this at the H1 stage (or was it last FY?) - stated the results were super, when they were anything but!

MINUS: there were rumblings about Greg Hallett, but I suspect these came only very recently, at least to this BB - did I miss something which might have been relevant?

MINUS: Ed Smyth never delivered, that was always very opaque.

For me the positive points appeared to make the shares a decent hold, at least whilst awaiting the results.

Some BB posters appear to have lots of knowledge of dodgy directors - maybe they keep a little black book.

Since being wise after the event is better than not being wise at all, I shall (like the rest of you) be looking with interest at the results.

PS. It won't be the first time a share price has 'stuck' before moving (up or down).

[jannief] 23/1/2007 09:07

Looks like the dividend they mentioned is some way off !!

[blindfaith2] 23/1/2007 08:48

ps I see we are down another 20% already this morning, could completely disappear in the next day or two. If this loss is a real loss then it would not surprise me if they went for a suspension as they must be close to trading insolvently and at best with no cash.

[blindfaith2] 23/1/2007 08:42

Looking at their Interim Accounts at 31 January 2006 they report stocks of £567K ( 31 July 05 of £505K & 31 January 05 of £434 ) so looking at this and the previous levels it would be affair assumption to guess that stocks at 31 July 2006 would be in the nature of £500-600K so we are looking at a write off of nearly 50% which is incredible even for TEL !

SteMis, you mention talking revenue too early – didn't we have this with TEL soon after they listed ? I can remember something about the nature in which they recognised profit. At the time I just could not believe how native they had been. So surely it can't be an adjustment of this nature, can it ?

It's going to need some expliaining, that's for sure.

[jonwig] 23/1/2007 08:39

So could it, conceivably, be a one-off write-off of goodwill?
I don't think so, as that was only £480k at the H1 stage.

Could there be a bad, and irrecoverable, debt? Possibly.

Either of these possibilities would, I think, be acceptable 'excuses', and could have been mentioned in the statement.
Because they haven't, I'm inclined to agree with SteMiS: something nasty in the woodshed.

[stemis] 23/1/2007 07:56

I'm afraid nothing would surprise me with this lot.

However, until yesterday we were expecting a profit of around £0.4M, now its a loss of £1.0M. That's a swing of £1.4M. At the last interims, the Group had gross assets (excluding the 'investment', which relates to goodwill on the Cassydora acquisition and will be subject to adjustment itself) of £2.848M. It seems hard to believe they just found out that 50% of their assets were worthless!

It seems highly probable that there is something more going on in the background and the bland nature of the statement seems to supports this. They had to put something out but were in no position to provide the details. Could it be fraud? Its hard to imagine getting your accounts wrong by £1.4M when you've had 2.5 months to check them! There is not enough stock for it to be a WIP valuation issue, so it must be unrecognised costs or taking revenue too early.

Either way its hard to see the company surviving long. The company and management (inc the CEO) now has zilch credibility with either its shareholders, its banks and maybe even its customers. If Hallet hasn't already gone then he must, followed by the CEO. I imagine one or more of its competitors will already have contacted the Chairman. He should take what he can get.