Bye Bye BHS and Austin Reed?
Discussion
anonymous said:
[redacted]
Yep, and another cynic may suggest that it was a case of Heads they win, and Tails they win. Or at least until the 'attainable' funds were still available before the whole edifice rolled off the end of the pier...And yet, these are the kind of people that we often hear lauded so much on PH as very deserving wealth creators; you know the kind of thing. They get a deserved 99% of everything and the mere workforce get 1% of f
k all; because they risked 'their' money didn't they...Jimboka said:
http://www.bbc.co.uk/news/business-36146161
A little bit iffy..
As a flea on a much bigger parasite, Dominic Chappell is simply a distraction, chaff to fool the radar. Follow the (bigger) money. This story is going to run and run.A little bit iffy..
There will be a lot of chaff in this story.
Edited by RottenIcons on Wednesday 27th April 07:35
J4CKO said:
So, do we like Philip Green or is he the parasitic thing mentioned.
I have to say, to my limited knowledge seems like a pretty obnoxious, greedy creature, now worth 2 billion apparently but his wealth seems to be a bit illgotten, at least in part.
How much cash does a 64 year old bloke need ?
I know him ,I used to do business with him.I have to say, to my limited knowledge seems like a pretty obnoxious, greedy creature, now worth 2 billion apparently but his wealth seems to be a bit illgotten, at least in part.
How much cash does a 64 year old bloke need ?
To key staff he is a great boss,very very generous ,but aside from that you are fairly accurate.
gumshoe said:
I'm certainly not bigging myself up. My initial point was not particularly aimed at the BHS situation in isolation but with Mr Green himself and his business dealings in general. There is genuinely no need to get your back up in this discussion and if I came across as arrogant then that wasnt the intention.
To clarify a few things for you (and please take no offence but you simply cannot be an accountant given your comments) but no the situation you describe is not relevant here. A dividend should not of itself cause an insolvency situation. Which is exactly what happened here.
You obviously want to argue a point without knowing the details yourself.
Look at the ownership structure of Arcadia. Taverna Investments Ltd is the owner, with ultimate ownership in Taverna Ltd in Jersey.
Look at 2005 accounts. Look at 2004 accounts. Post payment of a 1.3billion dividend, yes the company is now insolvent as a result of that dividend.
The company is a UK registered company so therefore subject to CA 1985 section 263.
Your arrogance is astonishing.To clarify a few things for you (and please take no offence but you simply cannot be an accountant given your comments) but no the situation you describe is not relevant here. A dividend should not of itself cause an insolvency situation. Which is exactly what happened here.
You obviously want to argue a point without knowing the details yourself.
Look at the ownership structure of Arcadia. Taverna Investments Ltd is the owner, with ultimate ownership in Taverna Ltd in Jersey.
Look at 2005 accounts. Look at 2004 accounts. Post payment of a 1.3billion dividend, yes the company is now insolvent as a result of that dividend.
The company is a UK registered company so therefore subject to CA 1985 section 263.
A fairly large part of my job is forensic accountancy.
I am a specialist in shareholder returns (dividends/buybacks) and leverage as well as having niche expertise in retail.
But obviously, you know better.
In fairness, perhaps what you are trying to say is that there were not enough distributable reserves for the dividend.
And that (which IS subject to CA 1985 section 263) might well get them in trouble.
Although you would have thought someone would have noticed that at the time, since slipping £1.2bn through your accounts isn't easy even in 2005.
As for solvency that is a completely different matter and here you are simply wrong.
1. Arcadia (which you insist on talking about despite only tangential relevance) IS NOT INSOLVENT.
2. It's Taveta not Taverna.
3. Here are the numbers...
In 2004 Taveta posted £280m of EBIT and paid £34m in interest. No probs.
In 2005, EBIT had grown to £310m and (underlying) interest was up to £43m. Again no probs.
Now in 2005 the company levered up by £1bn or so (to give them enough cash to pay the div) which obviously meant that they were going to have a significantly higher debt burden.
Indeed gross debt jumped from £0.8bn (2004) to £1.8bn (2005).
And the interest went from that £43m over 2005 to £81m.
However, here is the crux of it.
EBIT in 2006 dropped a little, down to £272m WHICH IS OBVIOUSLY PLENTY TO COVER £81m.
That is why you are wrong.
Taveta was perfectly solvent.
Arguably what matters more than the P&L is the cashflow.
So let's just check that...
Operating cash flow of £328m less capex of £125m left them PLENTY to pay the £77m cash interest burden and £47m in tax.
Hence they had positive cashflow of £79m.
I am genuinely confused as to what on earth makes you think they couldn't pay their debts.
Are you confusing "being insolvent" with "negative book value" or "negative shareholder equity"???
walm said:
Your arrogance is astonishing.
A fairly large part of my job is forensic accountancy.
I am a specialist in shareholder returns (dividends/buybacks) and leverage as well as having niche expertise in retail.
But obviously, you know better.
In fairness, perhaps what you are trying to say is that there were not enough distributable reserves for the dividend.
And that (which IS subject to CA 1985 section 263) might well get them in trouble.
Although you would have thought someone would have noticed that at the time, since slipping £1.2bn through your accounts isn't easy even in 2005.
As for solvency that is a completely different matter and here you are simply wrong.
1. Arcadia (which you insist on talking about despite only tangential relevance) IS NOT INSOLVENT.
2. It's Taveta not Taverna.
3. Here are the numbers...
In 2004 Taveta posted £280m of EBIT and paid £34m in interest. No probs.
In 2005, EBIT had grown to £310m and (underlying) interest was up to £43m. Again no probs.
Now in 2005 the company levered up by £1bn or so (to give them enough cash to pay the div) which obviously meant that they were going to have a significantly higher debt burden.
Indeed gross debt jumped from £0.8bn (2004) to £1.8bn (2005).
And the interest went from that £43m over 2005 to £81m.
However, here is the crux of it.
EBIT in 2006 dropped a little, down to £272m WHICH IS OBVIOUSLY PLENTY TO COVER £81m.
That is why you are wrong.
Taveta was perfectly solvent.
Arguably what matters more than the P&L is the cashflow.
So let's just check that...
Operating cash flow of £328m less capex of £125m left them PLENTY to pay the £77m cash interest burden and £47m in tax.
Hence they had positive cashflow of £79m.
I am genuinely confused as to what on earth makes you think they couldn't pay their debts.
Are you confusing "being insolvent" with "negative book value" or "negative shareholder equity"???
Hear, hear A fairly large part of my job is forensic accountancy.
I am a specialist in shareholder returns (dividends/buybacks) and leverage as well as having niche expertise in retail.
But obviously, you know better.
In fairness, perhaps what you are trying to say is that there were not enough distributable reserves for the dividend.
And that (which IS subject to CA 1985 section 263) might well get them in trouble.
Although you would have thought someone would have noticed that at the time, since slipping £1.2bn through your accounts isn't easy even in 2005.
As for solvency that is a completely different matter and here you are simply wrong.
1. Arcadia (which you insist on talking about despite only tangential relevance) IS NOT INSOLVENT.
2. It's Taveta not Taverna.
3. Here are the numbers...
In 2004 Taveta posted £280m of EBIT and paid £34m in interest. No probs.
In 2005, EBIT had grown to £310m and (underlying) interest was up to £43m. Again no probs.
Now in 2005 the company levered up by £1bn or so (to give them enough cash to pay the div) which obviously meant that they were going to have a significantly higher debt burden.
Indeed gross debt jumped from £0.8bn (2004) to £1.8bn (2005).
And the interest went from that £43m over 2005 to £81m.
However, here is the crux of it.
EBIT in 2006 dropped a little, down to £272m WHICH IS OBVIOUSLY PLENTY TO COVER £81m.
That is why you are wrong.
Taveta was perfectly solvent.
Arguably what matters more than the P&L is the cashflow.
So let's just check that...
Operating cash flow of £328m less capex of £125m left them PLENTY to pay the £77m cash interest burden and £47m in tax.
Hence they had positive cashflow of £79m.
I am genuinely confused as to what on earth makes you think they couldn't pay their debts.
Are you confusing "being insolvent" with "negative book value" or "negative shareholder equity"???
Europa1 said:
walm said:
Your arrogance is astonishing.
A fairly large part of my job is forensic accountancy.
I am a specialist in shareholder returns (dividends/buybacks) and leverage as well as having niche expertise in retail.
But obviously, you know better.
In fairness, perhaps what you are trying to say is that there were not enough distributable reserves for the dividend.
And that (which IS subject to CA 1985 section 263) might well get them in trouble.
Although you would have thought someone would have noticed that at the time, since slipping £1.2bn through your accounts isn't easy even in 2005.
As for solvency that is a completely different matter and here you are simply wrong.
1. Arcadia (which you insist on talking about despite only tangential relevance) IS NOT INSOLVENT.
2. It's Taveta not Taverna.
3. Here are the numbers...
In 2004 Taveta posted £280m of EBIT and paid £34m in interest. No probs.
In 2005, EBIT had grown to £310m and (underlying) interest was up to £43m. Again no probs.
Now in 2005 the company levered up by £1bn or so (to give them enough cash to pay the div) which obviously meant that they were going to have a significantly higher debt burden.
Indeed gross debt jumped from £0.8bn (2004) to £1.8bn (2005).
And the interest went from that £43m over 2005 to £81m.
However, here is the crux of it.
EBIT in 2006 dropped a little, down to £272m WHICH IS OBVIOUSLY PLENTY TO COVER £81m.
That is why you are wrong.
Taveta was perfectly solvent.
Arguably what matters more than the P&L is the cashflow.
So let's just check that...
Operating cash flow of £328m less capex of £125m left them PLENTY to pay the £77m cash interest burden and £47m in tax.
Hence they had positive cashflow of £79m.
I am genuinely confused as to what on earth makes you think they couldn't pay their debts.
Are you confusing "being insolvent" with "negative book value" or "negative shareholder equity"???
Hear, hear A fairly large part of my job is forensic accountancy.
I am a specialist in shareholder returns (dividends/buybacks) and leverage as well as having niche expertise in retail.
But obviously, you know better.
In fairness, perhaps what you are trying to say is that there were not enough distributable reserves for the dividend.
And that (which IS subject to CA 1985 section 263) might well get them in trouble.
Although you would have thought someone would have noticed that at the time, since slipping £1.2bn through your accounts isn't easy even in 2005.
As for solvency that is a completely different matter and here you are simply wrong.
1. Arcadia (which you insist on talking about despite only tangential relevance) IS NOT INSOLVENT.
2. It's Taveta not Taverna.
3. Here are the numbers...
In 2004 Taveta posted £280m of EBIT and paid £34m in interest. No probs.
In 2005, EBIT had grown to £310m and (underlying) interest was up to £43m. Again no probs.
Now in 2005 the company levered up by £1bn or so (to give them enough cash to pay the div) which obviously meant that they were going to have a significantly higher debt burden.
Indeed gross debt jumped from £0.8bn (2004) to £1.8bn (2005).
And the interest went from that £43m over 2005 to £81m.
However, here is the crux of it.
EBIT in 2006 dropped a little, down to £272m WHICH IS OBVIOUSLY PLENTY TO COVER £81m.
That is why you are wrong.
Taveta was perfectly solvent.
Arguably what matters more than the P&L is the cashflow.
So let's just check that...
Operating cash flow of £328m less capex of £125m left them PLENTY to pay the £77m cash interest burden and £47m in tax.
Hence they had positive cashflow of £79m.
I am genuinely confused as to what on earth makes you think they couldn't pay their debts.
Are you confusing "being insolvent" with "negative book value" or "negative shareholder equity"???
I get so frustrated when the media and then the public jump on the bandwagon of inflated moral outrage regarding a subject that they plainly do not understand
walm said:
Now in 2005 the company levered up by £1bn or so (to give them enough cash to pay the div) which obviously meant that they were going to have a significantly higher debt burden.
Fascinating reading that thanks.When you say levered up, are we talking taking effectively the same as mortgage leveraging in a BTL portfolio? They effectively mortgaged or took out loans on assets owned to inject cash in to the bank, effectively monetising previously notional asset value increases, which could then be considered profit and distributed as dividends?
emicen said:
When you say levered up, are we talking taking effectively the same as mortgage leveraging in a BTL portfolio? They effectively mortgaged or took out loans on assets owned to inject cash in to the bank, effectively monetising previously notional asset value increases, which could then be considered profit and distributed as dividends?
Sort of. Except it is nothing to do with property as such.They had an asset generating c.£300m in profit every year.
Some of that profit went to paying interest on debt.
They raised an extra £1bn in debt which temporarily went to cash in the bank.
But they quickly paid out that bank cash as a dividend hence took it out of the business.
At that point their solvency is simply a question of whether they can continue to cover the extra interest with ongoing profits.
Which they could. Easily.
With your example, the increase in value of the property isn't an operating profit (although it does improve the equity/book value in the business) it's much more likely to be an "exceptional gain".
Your OPERATING profit is simply the rental income less the cost of maintaining the property and collecting the rent etc...
Property re-valuations are typically one-off.
The fact the value of the property has gone up or down isn't really relevant (except for the distributable reserves question which is separate to solvency).
Imagine you set up the BTL portfolio with 100% cash no debt (no mortgages).
After a while you want to "lever up".
So you take on a mortgage and take out that cash from the bank to blow on coke and hookers.
Whether then value of the property has gone up or down since you set up doesn't really matter.
The guys giving you the mortgage MOSTLY care about the rental income your BTL portfolio generates since their first concern is that you can cover the interest payments.
(Obviously they also care about LTV and all that good stuff but the SOLVENCY is a simple income>expenses question and NOW those expenses will include interest on those new mortgages.)
walm said:
Your arrogance is astonishing.
A fairly large part of my job is forensic accountancy.
I am a specialist in shareholder returns (dividends/buybacks) and leverage as well as having niche expertise in retail.
But obviously, you know better.
It genuinely has nothing to do with arrogance at all. And at no point was my intention to offend you, but as you'll see from my response below, you have not helped the impression I got.A fairly large part of my job is forensic accountancy.
I am a specialist in shareholder returns (dividends/buybacks) and leverage as well as having niche expertise in retail.
But obviously, you know better.
walm said:
In fairness, perhaps what you are trying to say is that there were not enough distributable reserves for the dividend.
And that (which IS subject to CA 1985 section 263) might well get them in trouble.
Although you would have thought someone would have noticed that at the time, since slipping £1.2bn through your accounts isn't easy even in 2005.
Lol so now you're saying "perhaps"?? At all times I have made it clear that there was not enough in the reserves for the dividend to be paid. Then we had someone else in thread try to be clever and say that you can reduce the share premium account and issue from that. Yes, you can, but it becomes a realised profit (and hence available for distribution). And that (which IS subject to CA 1985 section 263) might well get them in trouble.
Although you would have thought someone would have noticed that at the time, since slipping £1.2bn through your accounts isn't easy even in 2005.
You yourself stated that you can pay from all profits not just annual profits, but no one had said you couldn't. It was a moot statement. No one was arguing otherwise??
walm said:
As for solvency that is a completely different matter and here you are simply wrong.
1. Arcadia (which you insist on talking about despite only tangential relevance) IS NOT INSOLVENT.
2. It's Taveta not Taverna.
3. Here are the numbers...
In 2004 Taveta posted £280m of EBIT and paid £34m in interest. No probs.
In 2005, EBIT had grown to £310m and (underlying) interest was up to £43m. Again no probs.
lol so now you're finally doing your homework and looking into things before posting on the subject. Where did I "insist" on bringing Arcadia into it? Where did I say Arcadia paid the dividend? Arcadia and PG's behaviour was brought into the thread earlier and not by me. Until I pointed you in the right direction, you didn't even have a clue who paid the dividend and which company had taken the loan. But yet you saw fit to argue on something you had not even looked at. Claiming all was fine and dandy.1. Arcadia (which you insist on talking about despite only tangential relevance) IS NOT INSOLVENT.
2. It's Taveta not Taverna.
3. Here are the numbers...
In 2004 Taveta posted £280m of EBIT and paid £34m in interest. No probs.
In 2005, EBIT had grown to £310m and (underlying) interest was up to £43m. Again no probs.
My point has always been regarding PG and the fact that his activities in general seem to break a few rules and no one has bat an eyelid.
Yes it was Taveta (hence why I said look at Arcadias FS as you can see there who owns what etc). And yes, as I said, they issued a dividend to the tune of 1.3 billion. And they did not have the p&l reserves to be able to able to legally do so.
walm said:
Now in 2005 the company levered up by £1bn or so (to give them enough cash to pay the div) which obviously meant that they were going to have a significantly higher debt burden.
Indeed gross debt jumped from £0.8bn (2004) to £1.8bn (2005).
And the interest went from that £43m over 2005 to £81m.
However, here is the crux of it.
EBIT in 2006 dropped a little, down to £272m WHICH IS OBVIOUSLY PLENTY TO COVER £81m.
That is why you are wrong.
Taveta was perfectly solvent.
Arguably what matters more than the P&L is the cashflow.
So let's just check that...
Operating cash flow of £328m less capex of £125m left them PLENTY to pay the £77m cash interest burden and £47m in tax.
Hence they had positive cashflow of £79m.
I am genuinely confused as to what on earth makes you think they couldn't pay their debts.
Are you confusing "being insolvent" with "negative book value" or "negative shareholder equity"???
The confusion appears to be yours. On what level have you dealt with insolvency? There is as you say cashflow insolvency (123(1) of IA1986) but there are other measures of insolvency. And what's more pertinent here is the discussion surrounding PG's behaviour and his liability in law.Indeed gross debt jumped from £0.8bn (2004) to £1.8bn (2005).
And the interest went from that £43m over 2005 to £81m.
However, here is the crux of it.
EBIT in 2006 dropped a little, down to £272m WHICH IS OBVIOUSLY PLENTY TO COVER £81m.
That is why you are wrong.
Taveta was perfectly solvent.
Arguably what matters more than the P&L is the cashflow.
So let's just check that...
Operating cash flow of £328m less capex of £125m left them PLENTY to pay the £77m cash interest burden and £47m in tax.
Hence they had positive cashflow of £79m.
I am genuinely confused as to what on earth makes you think they couldn't pay their debts.
Are you confusing "being insolvent" with "negative book value" or "negative shareholder equity"???
The insolvency test that would assist an action against PG on a personal level would be (i.e. clawback) would be the balance sheet test under section 123(2).
Negative balance sheet net assets still amounts to insolvency, in UK law.
You are correct, however, that you can continue to trade so long as you're able to service the debts (and with a realistic proposition that the company wasn't on a guaranteed path to further indebtedness to other creditors etc). That does not mean the company is not insolvent. But I never said to the contrary?
Two things are relevant here outside of the faffing about argue on things that are not relevant:
1) Was the dividend paid legal?
2) Did it cause the company to be insolvent (let's say under ANY measure of the insolvency Act 1986 which is the relevant legislation as it is a UK company)?
Can you just answer those two and then your cheerleaders can give us their input? lol
gumshoe this whole time you have been using the word "insolvent" to mean "negative book value" rather than the common usage which actually matters.
You have conflated "big loan", "illegal dividend" and "insolvency" together to imply that Green did something wrong.
You questioned the wisdom of HBOS in giving out that loan.
Here's what we do know:
1. PWC signed off on Taveta's annual reports despite the very obvious negative book value.
2. HMRC knew about it all.
3. HBOS got paid back (very easily).
4. None of this has anything to do with the BHS pension.
5. Arcadia is still a going concern.
You are technically correct that is it unusual to have a dividend with negative equity but I strongly suspect that the companies house docs aren't enough to tell us what has gone on at the holdco/group level.
For example, press reports at the time make reference to a £460m dividend declared the year before but not paid at the Arcadia level somewhere, but I haven't had time to dig out exactly where that happened!
If it was as simple as pointing at negative equity on the balance sheet, I am sure someone would have raised questions back in 2005 when it was front page news.
You have conflated "big loan", "illegal dividend" and "insolvency" together to imply that Green did something wrong.
You questioned the wisdom of HBOS in giving out that loan.
Here's what we do know:
1. PWC signed off on Taveta's annual reports despite the very obvious negative book value.
2. HMRC knew about it all.
3. HBOS got paid back (very easily).
4. None of this has anything to do with the BHS pension.
5. Arcadia is still a going concern.
You are technically correct that is it unusual to have a dividend with negative equity but I strongly suspect that the companies house docs aren't enough to tell us what has gone on at the holdco/group level.
For example, press reports at the time make reference to a £460m dividend declared the year before but not paid at the Arcadia level somewhere, but I haven't had time to dig out exactly where that happened!
If it was as simple as pointing at negative equity on the balance sheet, I am sure someone would have raised questions back in 2005 when it was front page news.
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