Going concern warning knocks Vantis share prices
Vantis’ share price hit a new low this week after auditors Ernst & Young issued a going concern warning in the group’s six month interim report.
The company’s share price fell to 20p this morning – the lowest in a year. Its share price has lost a third of its value since Friday, when it closed at 29p.
Higher costs, together with a slower than expected start to Q2 were cited as the main reasons for the group’s reduced profitability and weakening liquidity.
Fees not yet recovered in respect of the group’s work on the insolvency of Stanford International Bank were also a major contributing factor, said the report which warned: “The validity of the going concern basis depends on the group being able to operate within its current banking facilities and covenants and the successful outcome of the above”.
The board said it aimed to reduce costs significantly for the year ending April 2011 and would also look at other measures to improve the cash position, including reducing working capital.
A spokesman for Vantis told AccountingWEB.co.uk...
Continued...
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Thanks for the extra analysis, David
And for alerting us to the story via your tweet earlier this week. The additional information sets the official statement into a more comprehensive context. Aside from the litigation and competitive issues that Vantis is facing, it also makes me wonder whether those people predicting the emergence of a new listed consolidation group are being a mite optimistic.
Listed accountancy firms
John
Vantis seem to have encountered particular difficulties which have not been encountered by other AIM listed accountants such as RSM Tenon and Begbies Traynor Group.
In theory there must be advantages to being a listed business - particularly a successful one. Tenon's recent merger with Bentley Jennison may be an example of those benefits in action.
But I have noticed some speculation amongst stock market investors as to whether Vantis is now ripe for takeover. If they were an 'ordinary' industrial or commercial company which had fallen upon hard times that might well be the case.
However in their particular situation because their field of activity is unusual for listed companies, and because such a high proportion of shares are held by directors and staff, I think it is less likely that a takeover bid will emerge.
It may well be that in the medium and longer term Vantis has good prospects - the writedowns made recently may prove to be more than prudent and fees may roll in to the bank both from the Stanford insolvency work and from the tax avoidance schemes presently under HMRC challenge.
But the dramatic falls in the share price - now slithering down the teens of pence - in part no doubt a reflection of the failure to pay a dividend this time and the auditors 'going concern' qualification on the interim accounts, demonstrate the downside of an AIM listing.
I suspect few partners in practice envy the position of their opposite numbers in Vantis right now!
David
Appeal Court decisions
Vantis has had good and bad news from the English Court of Appeal.
The Court has rejected an appeal by the US Receiver of Stanford International Bank (SIB) and has upheld a decision in the lower courts that the Centre of Main Interest of SIB was Antigua rather than the US. This puts assets under the control of Vantis as liquidators (rather than the US receiver). That's the good news.
The bad news is that the Appeal Court upheld a Criminal Restraint Order obtained by the UK Serious Fraud Office on behalf of the US Department of Justice.
This means that SIB assets remain frozen for the time being and cannot be released to pay the accrued fees of Vantis.
Vantis is to appeal this decision to the UK Supreme Court.
David
P.S. You can read the full Appeal Court judgment at
Vantis
The Vantis business is split into two divisions, Business Recovery Services (BRS) and Business Advisory and Tax Services (BATS).
BRS has suffered cashflow difficulties following the major amount of work done on one insolvency assignment (Stanford International Bank) for which no payment has been received in recent months following a legal wrangle between Vantis and the US receiver as to which of them is entitled to control assets in various international jurisdictions. The matter is due to be heard in court in England and by a financial regulator in Switzerland. Vantis say the timing of fee receipts in relation to this assignment remains uncertain.
BATS has suffered reputational damage as HMRC has commenced criminal proceedings against certain former employees and queried the efficacy of certain tax avoidance schemes previously marketed by Vantis.
Since last October there has been a boardroom shakeup and the latest published accounts include a significant writedown of non-cash assets resulting in a debit balance on retained earnings for the group and no dividend.
Vantis have renegotiated their bank facilities, removing a substantial repayment obligation which was to fall due later this year. The costs of the revised facility are substantially higher than previously, says the company.
A little more than 3 years ago the shares stood at over 250 pence each, they have lost over 90% of that value.
It is reported that more than 50% of the shares in Vantis are owned by the company's directors and staff.
David