Bye Bye BHS and Austin Reed?

[gumshoe]

walm said:

I don't think that is anything like "known".

You don't necessarily pay divs from the simple annual profits - you can build up a distributable reserve over time rather than do it annually.

The tax situation is fine - she is offshore.

And once again, if the company was £800m "insolvent" - why would the pension trustee allow someone to buy it for £1??

You can quite happily trade with £800m in net debt, just as long as you have the income to cover the interest payments.

Would love to know how you came to the £800m insolvent figure.

You pay dividends from profits. That is the ONLY way you can pay dividends. Your profit and loss account doesn't care where the profit was achieved (this period or previous periods) but it must always be paid from profit.

You can trade with £800 million in debt. But tell me what right minded creditor will loan you £1billion and then allow you to distribute it to yourself, ultra viles, and result in the company being insolvent.

Have you checked Arcadias accounts?

[Smollet]

The Don of Croy said:

Have had no cause to look at their clothing...says it all. Is Dunn & Co still going?

They closed years ago iirc. It was a shop that as a youth you passed by without a glance but in later life you looked through the window and thought oh that might keep the cold out.

[Europa1]

gumshoe said:

You pay dividends from profits. That is the ONLY way you can pay dividends. Your profit and loss account doesn't care where the profit was achieved (this period or previous periods) but it must always be paid from profit.

You can trade with £800 million in debt. But tell me what right minded creditor will loan you £1billion and then allow you to distribute it to yourself, ultra viles, and result in the company being insolvent.

Have you checked Arcadias accounts?

However, it is possible to "create" additional distributable reserves by eg a reduction of share premium account.

[Adrian W]

Theirs something fishy going on or I have read the BBC news site wrong, how can you buy a company one week and then put it in administration the next, either there is a big issue with the due diligence or they were always going to do something else, assets? property development? ??

[gumshoe]

Europa1 said:

However, it is possible to "create" additional distributable reserves by eg a reduction of share premium account.

Your point being? You do know the reduction in capital is considered realised profit...?

So again the point is repeated, a dividend can only be issued from PROFIT.

And a company won't end up insolvent if it had enough profit to cover the dividend now would it?

Clearly no accountants on this thread...

[walm]

chimster said:

Trustees fault for who SPG sold the business to? What strange thinking.

My understanding is that they need to OK any change of control and the terms of such - so in effect they have veto over who he sells to, yes!

[walm]

gumshoe said:

Your point being? You do know the reduction in capital is considered realised profit...?

So again the point is repeated, a dividend can only be issued from PROFIT.

And a company won't end up insolvent if it had enough profit to cover the dividend now would it?

Clearly no accountants on this thread...

I would be careful bigging yourself up or questioning qualifications.

It's perfectly possible to pay years of dividends or even build up to one whopper and then fall into insolvency subsequently.
In fact that is what happens almost every time there is an insolvency!!

You keep repeating that they levered up £800m and were somehow instantly insolvent.
That just isn't the timeline.
They levered up, paid the div and SUBSEQUENTLY trading deteriorated such that it led to insolvency (no doubt accelerated by the increased debt burden and interest payments to service it).

Lending them the £800m made sense to some muppet at the time because they will have used far too optimistic turnaround projections which SUBSEQUENTLY failed to materialise.

Again, pretty much exactly what happens with any levered insolvency.

And sadly looking at the Arcadia reports doesn't help a huge amount since that's the GROUP including TopShop, Burton et al... not just BHS standalone.

[walm]

Adrian W said:

Theirs something fishy going on or I have read the BBC news site wrong, how can you buy a company one week and then put it in administration the next, either there is a big issue with the due diligence or they were always going to do something else, assets? property development? ??

They bought it a year ago.
But yes it looks like terrible DD with the sale-and-leaseback program for the property failing to meet expectations (e.g. the flagship on Oxford Street).

[Adrian W]

walm said:

Adrian W said:

Theirs something fishy going on or I have read the BBC news site wrong, how can you buy a company one week and then put it in administration the next, either there is a big issue with the due diligence or they were always going to do something else, assets? property development? ??

They bought it a year ago.
But yes it looks like terrible DD with the sale-and-leaseback program for the property failing to meet expectations (e.g. the flagship on Oxford Street).

The BBC site says:-

Austin Reed was bought just last week by the distressed retail specialists Alteri Investors, who purchased the struggling firm for an undisclosed sum.

The new owners had already loaned the company £6m last year to improve its online operations and purchase new stock.

[walm]

Adrian W said:

The BBC site says:-

Austin Reed was bought just last week by the distressed retail specialists Alteri Investors, who purchased the struggling firm for an undisclosed sum.

The new owners had already loaned the company £6m last year to improve its online operations and purchase new stock.

Sorry, sorry, I thought you meant BHS!

[Europa1]

gumshoe said:

Europa1 said:

However, it is possible to "create" additional distributable reserves by eg a reduction of share premium account.

Your point being? You do know the reduction in capital is considered realised profit...?

So again the point is repeated, a dividend can only be issued from PROFIT.

And a company won't end up insolvent if it had enough profit to cover the dividend now would it?

Clearly no accountants on this thread...

Yes, I do know, thanks; I was trying to expand on the fact that "profit" is often misconstrued as cold hard cash made in the current financial year, but in fact can be massaged.

I am inclined to agree with your assertion there are no accountants on this thread. And I have to ask, do your rules of engaging in conversation only apply one way?

[johnfm]

gumshoe said:

johnfm said:

Quite a few unsubstantiated claims on this thread.

We have no idea yet what the cause of the pensions deficit is. Post-Maxwell, I find it hard to imagine Green was unlawfully siphoning funds from it with fraudulent transactions as per Maxwell.

I think I will await some form of evidence before allowing my knee to jerk in Angela Eagle-esque fashion.

The bits that are known are the Green paid his wife near near enough £900m as a dividend, from a company that did not have the profits to allow for that.

It was in fact from a £1 billion loan taken from HBOS. No tax was paid on the dividends by Green or the company and this plunged the company into an insolvent position (800 odd millions insolvent).

But it was all allowed to happen, HBOS sanctioned it, HMRC knew about it and allowed it. Yet anyone else it would have been considered an illegal dividend.

Reading a report from 2005 at the time of the Arcadia £1.2m dividend, it would seem that Arcadia (not BHS) paid the dividend. That year Arcadia group announced £326m profit with net cash generation up to £404m - seemingly enough to cover the HBOS loan obligations (a previous £850 loan which was made three years previously in 2002 to buy the group was repaid in 2 years).

Was Arcadia plunged into insolvency in 2005 as you claim? Maybe you're conflating Arcadia and BHS. BHS wasn't even part of the Arcadia group at the time of the £1.2b dividend - it was privately owned by the Greens at that point.

What's the tax on the dividend got to do with it?

Edited by johnfm on Tuesday 26th April 14:07

[crankedup]

Europa1 said:

gumshoe said:

Europa1 said:

However, it is possible to "create" additional distributable reserves by eg a reduction of share premium account.

Your point being? You do know the reduction in capital is considered realised profit...?

So again the point is repeated, a dividend can only be issued from PROFIT.

And a company won't end up insolvent if it had enough profit to cover the dividend now would it?

Clearly no accountants on this thread...

Yes, I do know, thanks; I was trying to expand on the fact that "profit" is often misconstrued as cold hard cash made in the current financial year, but in fact can be massaged.

I am inclined to agree with your assertion there are no accountants on this thread. And I have to ask, do your rules of engaging in conversation only apply one way?

AKA Tesco. So good at posting year on year 'profits'. Some even thought Tesco Senior Management several years back were doing a good job Credit to the new CEO beginning to turn the juggernaut around.

[hora]

Is Gap in trouble?

Always in discounts, now it's 40% off ALL men's and women's wear.

[Adrian W]

crankedup said:

AKA Tesco. So good at posting year on year 'profits'. Some even thought Tesco Senior Management several years back were doing a good job Credit to the new CEO beginning to turn the juggernaut around.

You might not say that if you worked there,

[dandarez]

Just watched work and pensions committee chair, Frank Field, on Sky (Ian King Live) talking about Sir Philip Green being 'invited' and face questions.

Frank said that Green had called the committee and himself 'a bunch of effin' assholes'.



Ian King apologised to viewers in case it caused offence.

No mate, it was just

[J4CKO]

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 ?

[gumshoe]

walm said:

gumshoe said:

Your point being? You do know the reduction in capital is considered realised profit...?

So again the point is repeated, a dividend can only be issued from PROFIT.

And a company won't end up insolvent if it had enough profit to cover the dividend now would it?

Clearly no accountants on this thread...

I would be careful bigging yourself up or questioning qualifications.

It's perfectly possible to pay years of dividends or even build up to one whopper and then fall into insolvency subsequently.
In fact that is what happens almost every time there is an insolvency!!

You keep repeating that they levered up £800m and were somehow instantly insolvent.
That just isn't the timeline.
They levered up, paid the div and SUBSEQUENTLY trading deteriorated such that it led to insolvency (no doubt accelerated by the increased debt burden and interest payments to service it).

Lending them the £800m made sense to some muppet at the time because they will have used far too optimistic turnaround projections which SUBSEQUENTLY failed to materialise.

Again, pretty much exactly what happens with any levered insolvency.

And sadly looking at the Arcadia reports doesn't help a huge amount since that's the GROUP including TopShop, Burton et al... not just BHS standalone.

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.

[gumshoe]

Europa1 said:

Yes, I do know, thanks; I was trying to expand on the fact that "profit" is often misconstrued as cold hard cash made in the current financial year, but in fact can be massaged.

I am inclined to agree with your assertion there are no accountants on this thread. And I have to ask, do your rules of engaging in conversation only apply one way?

Apologies you're right there is no need to engage in that way. Understand your point but I did make it clear it had to be from profit in the first.

[gumshoe]

johnfm said:

Reading a report from 2005 at the time of the Arcadia £1.2m dividend, it would seem that Arcadia (not BHS) paid the dividend. That year Arcadia group announced £326m profit with net cash generation up to £404m - seemingly enough to cover the HBOS loan obligations (a previous £850 loan which was made three years previously in 2002 to buy the group was repaid in 2 years).

Was Arcadia plunged into insolvency in 2005 as you claim? Maybe you're conflating Arcadia and BHS. BHS wasn't even part of the Arcadia group at the time of the £1.2b dividend - it was privately owned by the Greens at that point.

What's the tax on the dividend got to do with it?

Edited by johnfm on Tuesday 26th April 14:07

Hi John, please see my earlier post to walm.