Woodford Concerns

Aminatidi

Prism wrote: »

Interesting read here

https://www.reuters.com/article/us-woodford-inv-suspension-advisers/woodford-struggles-to-build-bridges-with-uk-financial-advisers-idUSKCN1VD14Z?il=0

What I find surprising is that IFAs (5 in this example) would even considering putting their clients money in an obviously high risk small cap income fund that was kicked out of the income sector for not actually producing enough income. Exactly which gap was it supposed to fill.

It does rather make you wonder what most consumers reactions would be if their IFA said "Don't worry, it was just a bump in the road" whilst trying to take them back into Woodford.

edgex

bowlhead99 wrote: »

Well, BDO signed off the group consolidated financial statements for Sabina Estates Limited for 2018 showing in their cashflow statement that they had added over €21m of property inventory (taking the total to €77m) while issuing €40m of new preference share capital during the year. Inventory went up by more than €21m total because in addition to the few million Euros of purchases and the €16m of direct development costs and €1.5m of allocated overheads, there was also capitalised interest cost (standard practice in a property development business).

That would be SABINA ESTATES GROUP HOLDINGS LIMITED ?
ultimately controlled by SABINA ESTATES LIMITED, a Company incorporated in Guernsey

The Holdings company has zero property assets, but a loan of E83m to subsidiaries
It's even got negative equity

It is receiving interest on that loan (E6.5m for 2018) but it's cost them E5.8m as a finance expense.
Borrowed from the parent company in Guernsey?
It's supposedly a $400m project.

The Guernsey company makes a cash loss.
The directors of which are taking out E200k a year in fees. (One of them has been taking E400k a year in fees from a subsidiary)
Loads of preference shares, which they are already paying out interest on.



So, what is the actual investment?
Presumably the villas will be for sale, which leaves a clubhouse.
Will a fancy bar & maybe a restaurant show much capital growth, or income?
Is it something an investment fund should have invested in?

bowlhead99

edgex wrote: »

bowlhead99 wrote:

Well, BDO signed off the group consolidated financial statements for Sabina Estates Limited for 2018 showing...

That would be SABINA ESTATES GROUP HOLDINGS LIMITED ?
ultimately controlled by SABINA ESTATES LIMITED, a Company incorporated in Guernsey

It is the ultimate controlling party (Estates Limited) I'm taking about, who have provided audited consolidated group accounts which are appended to the Holdings accounts filed at Companies House.

The Holdings company has zero property assets, but a loan of E83m to subsidiaries
It's even got negative equity

You would not expect the holding company to hold the property assets. Its purpose is to hold debt or equity in the other companies within a financial group. The property development and operational management will be done in the operating subsidiaries or propcos.

It is receiving interest on that loan (E6.5m for 2018) but it's cost them E5.8m as a finance expense.

Would you expect a holding company to be particularly profitable, or simply to make enough margin on its financing activities to cover most of its costs? The latter would be typical.

The Guernsey company makes a cash loss.

No real reason to expect it to be profitable when the properties have not yet been developed and sold to allow dividend income or other capital distributions to repatriate the cash to the Guernseyco and owners/lenders to the group.

The directors of which are taking out E200k a year in fees. (One of them has been taking E400k a year in fees from a subsidiary)

In your experience do directors of multi million pound property development businesses work for free?

Loads of preference shares, which they are already paying out interest on.

Would you expect Woodford or other financial investors to let the property development group have their cash (funding tens of millions of euros of property investment so far, plus cash in the bank for future development work or refinancing existing loans), for free?

So, what is the actual investment?
Presumably the villas will be for sale, which leaves a clubhouse.
Will a fancy bar & maybe a restaurant show much capital growth, or income?
Is it something an investment fund should have invested in?

I am not sure who is missing the point here, you or me.

Are you seriously asking "why would an income fund invest in preference shares of a property developer paying a healthy coupon?"

Or are you asking "why would anyone with an investment fund want to put money into a property developer whose business model is to build properties and sell the properties for more than it cost to build them"?

Maybe there is a smarter way you could ask the question.

But please don't shoot the messenger. I don't know much about the nature of Woodford's investment here, or its prospects.

Maybe Woodford had the wool pulled over his eyes However, if people are going to say that it is all a scam and Woodford has done a staggering lack of due diligence etc, simply on the basis that they don't understand that they should expect to see intercompany loans in a holding company's financial statements, or interest accrued on preference shares where the shareholders' money has been taken into the business and used, etc, or they don't understand why an investment fund would want to invest into a property developer, or they think the directors should take lower salaries... there is only so much time I can put into a response on a bank holiday long weekend

Brian65

Shares in Stobart, in which Woodford is the largest investor, have now been suspended over accounting irregularities.
As he contemplates his £7million salary and £30 million dividend, does Woodford regret being such a failure?

arnoldy

Absolutely fuming with Link Solutions. Quite why they have a licence to practice in UK is quite beyond me after the Hargreaves Landsdown - Woodford - Link Solutions Shenanigans.


So they have marked down IH massively - without as far as I can tell any new evidence. Thus affecting WPCT.


What has changed since the last valuation? What new facts have emerged? Or rather as I suspect they completely overvalued Industrial Heat, and can now bury the bad news on a pre bank holiday Friday.


In most professions that level of professionalism would get you banned.


Sorry for the rant.

Alistair31

Brian65 wrote: »

Shares in Stobart, in which Woodford is the largest investor, have now been suspended over accounting irregularities.
As he contemplates his £7million salary and £30 million dividend, does Woodford regret being such a failure?

I heard the Stobart story on the radio and came straight here to comment. Neil certainly knows how to pick em.

What a sorry mess.

Brian65

arnoldy wrote: »

What has changed since the last valuation?

More money has been spent on research

arnoldy wrote: »

What new facts have emerged?

Basically none. The money spent on research has produced nothing of value.

AnotherJoe

arnoldy wrote: »

Absolutely fuming with Link Solutions. Quite why they have a licence to practice in UK is quite beyond me after the Hargreaves Landsdown - Woodford - Link Solutions Shenanigans.
So they have marked down IH massively - without as far as I can tell any new evidence. Thus affecting WPCT.
What has changed since the last valuation?
The penny has dropped it's a scam?
What new facts have emerged? Or rather as I suspect they completely overvalued Industrial Heat, and can now bury the bad news on a pre bank holiday Friday.
If they give it any value then yep,it's over valued.
In most professions that level of professionalism would get you banned.
Sorry for the rant.

See my earlier post, I reckon they are gradually running down it to zero but it would be too embarrassing to do that in one fell swoop after uprating it 3.5x a few months ago.
In my book they are a shambles and have zero credibility.

Alexland

Alistair31 wrote: »

I heard the Stobart story on the radio and came straight here to comment. Neil certainly knows how to pick em.

From what we know so far about the truckers, overstating their operating profit by 4% is hardly going to take the company down so for Woodford this is one of his better problems.

Alex

bowlhead99

arnoldy wrote: »

Absolutely fuming with Link Solutions. Quite why they have a licence to practice in UK is quite beyond me after the Hargreaves Landsdown - Woodford - Link Solutions Shenanigans.

I'm aware of Link being the Woodford funds' ACD, as they are for various other funds. They have lots of other clients. What are the HL - Link Solutions shenanigans to which you refer, that should have resulted in them losing their licence to operate? Are you just upset they quite sensibly suspended the fund? Or is it some other 'shenanigans' issue?

So they have marked down IH massively - without as far as I can tell any new evidence. Thus affecting WPCT.

How can you tell if they have, or have not, got any new evidence of value or lack of value?

Do you have the business plans to show if they are ahead or behind plan and what specifically they are researching or funding right now?

Do you have the latest management accounts?

Have you sat along Woodford in discussions with potential acquirers of his stake to understand what they might be willing to pay, or how they would value it if they were to take over funding the business?

What is your personal / professional relationship with Link that you would normally expect them to give you the detailed mechanics of the valuation model and now you are upset that you can't tell how they have done it this time?

I suggest the answer to all that is no, you don't know what is going on, and you don't usually either, so they aren't conducting themselves differently for this particular valuation and there is nothing special resulting in you not having the intimate details of the valuation, as you never normally get such details.

So, given you don't know what is going on within that private company, and you are not involved in the valuation process, and not au fait with valuing equity stakes in private venture capital businesses anyway, how can you say they have no evidence for what they are doing?

Sorry for the rant.

As you can see from the WPCT share price vs its published NAV, and the fact that the share price fell much less than the fall in the published NAV, many people did not think the NAV of certain private holdings were credible.

Some no doubt felt that IH should not have been marked up last time around anyway, to the enterprise value implied by what IH's investors were paying in the last funding round. Some quite vocal commentators think the value of a strategic stake in this particular research company should just be valued at zero, because a Google search would tell them that all the lines of enquiry for things that the company might try to research will all become dead ends.

If Link do their periodic review of the private company valuations and decide to continue to hold at the carrying value from last time around, the people who think it should be valued at nil will be very angry. If they write it off, other people will be angry. If they write it half off, the cynics will say they are just trying to be crowd pleasers and are writing it half way off now and plan to write off the rest later. Basically Link are damned if they do and damned if they don't. Someone is going to have a rant either way. Today it was your turn.