TNO – RSM Tenon – doesn’t add up

A poster on ADFVN to the QPP (Quindell) board noted that it was audited by RSM Tenon. An article on 23-Aug-2012 commented on TNO’s travails (emphasis added):

Other elements of the loss related to a settlement the firm reached with the Financial Services Authority in February 2010 over failings in its financial management service line and “significant” accounting errors in the prior-year accounts including, embarrassingly for an accountancy firm, accounting for a lease as an operating lease when it should have been accounted for as a finance lease.

Words fail. TNO’s accounts where audited by PwC. So it makes PwC looks foolish for failing to catch this. The article concludes:

What will happen next? Management buy-outs of individual offices or sale to another firm are typically among the options in these circumstances. But it may simply be that RSM Tenon, under the guidance of a focused management team, succeeds in trading through adversity. We will have a better understanding of when, and indeed if, RSM Tenon will fly high again when its year-end results are announced in October.

Hindsight is a wonderful thing. Over the last 6 months, TNO’s shares have lost 59%, compared to a gain of 15% of the Footsie. It released an IMS on 03-May-2013:

Trading in the period under review has been similar to the first half of our financial year with revenue continuing under pressure due to general market conditions. Whilst we continue to achieve further cost efficiencies, the market for professional services remains challenging. Our close attention to cost reduction has meant that we have mitigated much of the pressure on revenue and we therefore expect underlying EBITDA to be towards the lower end of management expectations

Says it all, really, doesn’t it?

I notice that on 01-Feb-2013, TNO changed their auditors to BDO. I can’t see that will restore much credibility, even if PwC seem to have a lot to answer for.

On 18-Oct-2012, Nicholas Page was appointed as a non-exec director and chairman of the remuneration committee. His CV doesn’t seem all that impressive. His is on the board of Care Europe SA, “one of Germany’s larger nursing and assisted living groups”. The track record for similar operations in the UK have been abysmal. He also has a directorate at International Personal Finance PLC, “a FTSE 250 company providing short term credit to 2.4 million customers in Eastern Europe and Mexico.”; an operation I consider to be “morally challenged”. Cattles, anyone?

On 30-Apr-2012, Adrian Martin, Chairman, and Michael Findlay, Non-Executive Director, stepped down from the board. Quite.

TNO has a market cap of a little under £10m, a PER of 3.4, but negative net cash flow. In fact, it has had negative net cash flow for the last four years, and a gearing level of 157%.

A statement in IMS on 26-Feb-2013 sounded rather ominous:

The covenants in relation to our banking arrangements were tightly drawn, with only a relatively small amount of headroom against potential reduction in revenue. The covenants and other terms of the facility tighten over time, particularly in the second half of the 2014 financial year, and were set on the basis of a larger business than we have now.

A Penny Dreadful if ever there was one.


About mcturra2000

Computer programmer living in Scotland.
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1 Response to TNO – RSM Tenon – doesn’t add up

  1. Pingback: IPF – Interpersonal Finance – avoid the bottom-feeders | Mark Carter's blog

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