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RSM Tenon shares plummet

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13th Dec 2011
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Shares in RSM Tenon have fallen dramatically after its chief executive warned that "challenging conditions" were hitting the accountancy firm hard.

Company shares crashed by 32% this morning after the firm warned it is getting close to its maximum banking facilities; however the firm states it is still in compliance with its obligations.

With RSM Tenon getting dangerously close to its borrowing limit, and following the demise of Bath-based accountants Target, the plight of overextended accountancy firms is now very real.

At the firm’s AGM today chief executive Andy Raynor confirmed that all of its service lines had suffered a fall in year-on-year trading performance, particularly in the area of transaction-based work.

The firm usually suffers net cash outflows in the first few months of the year, but this has proved even more the case due to tougher than expected trading conditions. Raynor noted how trading patterns had “exacerbated this effect in the current financial year."

He said the company was meeting its obligations to its lenders but headroom would "continue to be limited” as it progressed towards the final quarter of the year.

Commenting from the broker perspective, Nicola Draper of Draper Hinks, said: “We are starting to see accountants overtrading, invariably from our perspective we are seeing potential purchasers of fees who see getting into debt and acquiring a block of fees or another practice as the only way to replace reduced turnover. They hope that sharing overhead across more turnover will be the answer, the real answer is just to continue supporting clients in the best way possible while critically reviewing overheads. It is however hard for business as big as Tenon to move quickly to reflect the current volatile market conditions for accountants.”

It seems that the uncertain economic conditions RSM alluded to when reporting its interim management statement last month have continued to worsen.  Raynor added: “All our service lines are working to improve profitability and prospects for the remainder of the year, but markets will remain erratic.”

The company’s interim results for the six months ended 31 December 2011 will be published on 21 February 2012.

The firm will also be required to renegotiate its overdraft facilities in the first half of 2012.

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Replies (11)

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By Brugesbear
14th Dec 2011 10:59

Such a shame to see my former employer doing so badly....

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By asking
14th Dec 2011 12:01

They wont be the last

Sign of things to come?

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By BIGWAL
14th Dec 2011 12:23

Amazing

Considering their massively excessive fees, this is really surprising.

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7om
By Tom 7000
14th Dec 2011 13:53

more to come

Wait till the new 3% pensions surcharge comes in (and  the employees have to pay their bit too). Employees  wont be getting pay risesthat year to compensate the employers for their 3%.

Thats going to hit UK cashflows everywhere and moneys going to be tighter and theres then downward pressure on accountancy fees.

Also the audit thresholds changing and the larger firms like Tenon Vantis Target (oops)...are going to lose audit fees.

The banks dont know if they are coming or going so theres no fees on transactions linked with lending

No doubt redundacies will continue at HMRC so they will take even longer to answer their post.

Staff costs appear to be rising, as staff demand more cash due to increasing electric bills, vat food prices etc

In my opinion, its all just going to get a lot worse :o(

 

Apart from that...Happy Xmas

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By justsotax
14th Dec 2011 16:35

Thanks Tom...you have really

cheered me up.....unfortunately I fear you are correct....the headless chicken act being maintained by what seems every leader around the world is just not giving a good vibe.....

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By dbowleracca
14th Dec 2011 23:32

They dropped to 3p at one point today!
For a few minutes they traded at only 3p which values the firm at about £10m. If I had that sort of money to invest, with £50m spare, I would have bought them.

It just goes to show that you shouldn't have listed accountancy firms - just doesn't work.

A firm like tenon are not big enough to compete with the big 4 and too big to pick up much of the sme Market, so they struggle along in the middle where the businesses they are targetting will be looking for either a cheaper or better solution.

Also, trying to build a business from lots of component parts so quickly is an enormous challenge - different cultures, client bases etc.

I heard from someone I know that the people from bentley jennison and tenon work different hours, use different audit documentation and are basically two firms sharing an office! Not good when you have annual revenue of 100s of millions of £

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7om
By Tom 7000
15th Dec 2011 16:52

wonder what it is

Ha ha ha there turnovers £250m and they are worth 10m...thats 10 days income give or take..actually if you allow for vat at 20% in terms of cashflow...8 days...

...and If I ran it like mine here, the profit I made in the first month would pay for it....never mind about 2 or 3 years payback period.

Somethings not right here...I wonder what it is?

 

 

 

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7om
By Tom 7000
15th Dec 2011 17:07

How to fix tenon

If I was Fd of Tenon...

I would go and see...

a) The nice man at Goldman Sachs

b) The FD of Thomas cook

I would take all 200 Thomas Cook premises off their hands that they dont want. I am now nicely set up with 200 offices with desks computers etc. I am sure I could get a sweetener from them to save redundancy costs etc as I can use the staff there to help.

Then I'll hire 200 accountants and stick one in each new ''Tenon Cook'' shop. saves money on signage ;o)

Ok boys and Girls its a race to see who can get the most new clients and you have two years to get enough to break even and 3 years to get the initial investment back that the nice man at Goldman Sachs has given us and if you do you all get a BIG bonus.

Year 5 each one is turning over on average  400k lets say and making 100k profit which in total is £20m profit a year and growing and I value that more than 3p a share ;o)

But then.... what do I know....

 

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By dbowleracca
15th Dec 2011 20:18

It's flash offices and director remuneration
profit is low because, unlike a practice that is owned by the directors/partners they have to reward the managent team with a Market rate salary which is probably six figures for all of them.

And in addition they have very flash premises , for example the one in Nottingham used to have a Starbucks in it!!

I like the suggestion of opening lots of branches by exploiting Thomas cooks situation but I don't think it would work with the type of business they run and the clients they target.

One thing for sure though - I would definitely want more than 10% profit though on sales of £250m I think more like 25% would be acceptable.

Dividend per share was 1.6p and cut to .55p for the last financial year. If you were to get a similar return for this year, say .8p, I think that's a decent return. Shares were trading over 60p early this year so a return to those values at some point - or even 20p - would make it a very attractive investment!

How about an Aweb syndicate set up to take them over? 100 of us could all put in £100k and get a decent return each year if it drops back to 10m Market cap!!

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7om
By Tom 7000
16th Dec 2011 11:57

Im in

I'll take the Thomas Cook Branch in Farnborough

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David Ross
By davidross
16th Dec 2011 12:07

I suppose that will be the end of invites to Drinkies

................. or perhaps they will become even more desperate to secure the job of feasting off the bones of our clients' failing businesses

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