Most rail derailments are abrupt affairs. Not at Go-Ahead. It prefers to come off the rails in slow motion, with each gory update putting another crater in the share price.
Investors will recall that it was on August 27, with the shares at 977p, that they first embarked on the tortuous journey of the delayed full-year accounts. Across the Tannoy came the news that the figures to July 3 had been pushed back three weeks to September 30 awaiting sign-off by auditor Deloitte.
Still, it was really nothing to worry about. Just some “ongoing discussions” with the transport department over the “historic calculation” of the “profit share” for Southeastern: the train franchise 65 per cent-owned by Go-Ahead and 35 per cent by France’s Keolis. The sum in question in the previous accounts? A mere “£8 million”.
Then came September 28’s howitzer: news that a furious Grant Shapps was stripping the group of Southeastern after what the transport secretary called “a serious breach of the franchise agreement’s ‘good faith’ obligation”. It was, he said, over “£25 million of historic taxpayer funding which should have been returned”. Go-Ahead said sorry. Finance chief Elodie Brian fell off the train. News emerged that the Serious Fraud Office was poking around, not that that’s to suggest any wrongdoing on her part. The accounts were again delayed. And the shares dived a quarter to 769½p.
After that? Up popped Go-Ahead on November 8 to say the accounts would finally be pulling in on December 16. And now? Like the trains, delayed again. Only this time in even gorier fashion. Go-Ahead must have known there was potentially a bigger problem than it had admitted because, on August 11, its chairwoman Clare Hollingsworth and her opposite number at Keolis, Sir Derek Jones, had hired KPMG for an “independent review” of Southeastern’s accounts going back to October 2014: something that should have been disclosed to the market. The review’s now unearthed “serious errors”, with the findings shared with Shapps’s department.
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The upshot? Go-Ahead will miss January 3’s deadline to file its accounts, forcing the suspension of the shares a day later. Little wonder that, in the investor stampede to get off, the shares crashed another 15 per cent to a 19-year low of 600p. And not least when the bus and rail group, now valued at £259 million, also threw in a likely transport department fine that was “difficult to estimate”; news that it needs a covenant waiver from its banks over its £700 million net debts; and troubling provisions against its rail operations in Norway and Germany. It hopes the accounts will now be out by the end of January.
In short, a total shambles. And one that’s spanned the retirement of ex-boss David Brown, who wasn’t making any comments, and his successor Christian Schreyer, who took charge on November 5. Rail accounting can be complex. But it’s not that hard to calculate a profit share or the unused amount of a taxpayer advances for track access charges on the HS1 line from London to Kent. Was someone on the make? Whatever, the entire board, including audit committee head Adrian Ewer, looks to have failed to question the figures.
And why not suspend the shares immediately? Yes, house broker Investec issued a brave “buy” note. But who wants to get on a clattering train heading for suspension? The board has its work cut out getting Go-Ahead back on track.
Victorian plug hole
Not every company can give investors the full exploding khazi experience. But that’s what makes Victorian Plumbing different. It was only in June that the family owned seller of bathroom kit pitched up on Aim at 262p a share, valued at £850 million. On went the financial taps, with founder boss Mark Radcliffe cutting his 72 per cent stake to 46 per cent and pocketing £212 million, his bro Neil cashing in £42 million and their mum Carole taking out £12 million.
There were clues to what sort of float this could be. It raised just £11.6 million for business, while putting a full-flush price on Victorian’s £26.2 million annual adjusted ebitda. No matter, the float banks Barclays, Numis and GCA Altium persuaded investors to take a punt on an outfit chaired by ex-William Hill boss Philip Bowcock.
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To say they’ve taken a bath would be a polite way of putting it. They’re knee-deep in something much worse. The latest full-year figures sent the shares down 41 per cent to 91½p: a 65 per cent loss of value in six months. Bowcock says “long term the fundamentals haven’t changed”, with Victorian still taking market share and lifting ebitda to £40.1 million.
But what about the here and now? Amazingly, Victorian has spotted that, post-lockdown, people have better things to do than refit their bathrooms, while supply chain disruption has hurt, too. The result? Barclays’ own analysts have cut this year’s ebitda estimate by 45 per cent to £24.1 million due to falling gross margins, higher ad spend and a 16 per cent drop in forecast sales. Their share price target? Cut to 130p.
As for Bowcock, he’s now spent “the money for poor Mrs Bowcock’s Christmas present” on £48,760 of Victorian’s shares at 92p. She should ask the minted Radcliffes to buy her something much nicer.
Made unmade
A top week for floats. A day before Victorian’s mid-June listing came Made.com at 200p, valuing the online furniture retailer at £775 million. It’s just warned of a sales hit this year of up to £45 million, due to Vietnamese factory closures, chocka ports and longer shipping times. The shares? Down 9 per cent to 122p. Were London’s fund gurus all focused on Royal Ascot that week?
