LON:UTW | UTILITYWISE - AN AUGEAN STABLES?

29th Jun '17 by Bonitabeach

7 comments 4655 reads

A disastrous RNS from Utilitywise this morning. This follows an increasingly revisionary series of news that always diminished previously reported profitability and cash flow.

Brendan Flattery, the new CEO, appears to be tackling the issues but missing from this morning's announcement is the resignation of the directors and CFO if appropriate, responsible for this "over estimation of energy consumption".

"Over estimation" on this scale reeks of deliberate fraud - is nobody in Utilitywise familiar with metering?

Come on Brendan, I am tired of this drip feed; act decisively.

Bonitabeach

Disclosure: Long: LON:UTW

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Bonitabeach

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7 comments

Bonitabeach

15th Nov '17

Update 15 November:

"As part of its audit procedures, the Group's external auditor, BDO LLP, has now requested that the Group obtains additional advice from an independent accounting firm in respect of the Group's estimation methodology for expected consumption levels on live contracts."

From the RNS of 29 June:

"Utilitywise has been made aware of apparent material levels of under-consumption in certain contracts placed with one of the major energy companies dealt with by the group."

"The Board is satisfied that this issue is materially specific to those contracts placed with the Energy Company and that the risk of similar issues arising with other energy suppliers is low following changes in internal controls at the Group. Accordingly, the Board does not anticipate a risk to the future revenues, profits and cash flows of the Group as a result of a recurrence of this issue in other contracts."

Brendan Flattery, Chief Executive Officer, Utilitywise, commented: "Along with the Board, the management and I are confident that the risk of similar issues with other suppliers is minimal."

The whole Board has no credibility left - resign. Their incompetence and/or deliberate malfeasance is only matched by my stupidity in still holding some shares!

Bonitabeach

gus 1065

17th Jan '18

Update on the audit review of Utilitywise (LON:UTW) 2017 accounts released this morning. Summary extract below - lots more detail on the accounting nuances in the full RNS for those with the stamina. As expected, there’s a requirement to restate a lot of historic accounts with a “material impact on stated shareholder equity” as well as feeding in to 2018 results as and when they are finalised. In a post Carillion (LON:CLLN) world, not sure they’ll be getting too much of a sympathetic hearing from the likes of lending banks and other stakeholders.

Gus.

———————

17 January 2018

Utilitywise plc

("Utilitywise" or the "Group")

Final results update

Utilitywise, the leading independent utility cost management consultancy, announces a further update in respect of its full year results for the year ended 31 July 2017 ("FY17").

On 15 November 2017, the Group announced a further delay to the announcement of its final results for FY17. This was due to the Group's auditor requesting a further independent review of the Group's methodology for determining revenue recognition on its utility procurement contracts.

· The review, which was undertaken by a major accountancy firm, is now complete and, as a result, Group results will now reflect a change to the accounting policy of the Group regarding the estimation and recognition of revenue on contracts.

· This proposed change will have no impact on the cash flows or underlying economic performance of the Group.

· The proposed change will reduce the initial revenue recognition value of new contracts, which would then positively impact the final revenue adjustment value at the end of those contracts, all else being equal.

· The average level of under-consumption, across all contracts that reached maturity in the two-year period from 1 August 2015 to 31 July 2017 was 18%, an improvement compared to 19% in the equivalent period to 31 July 2016.

· Contracts with lower individual values typically demonstrate a lower average degree of under-consumption over their life; contracts of value less than £50,000 comprise the substantial majority of the total value of live contracts as at 31 July 2017.

· A prior period adjustment will be required upon the adoption of the new proposed accounting policy. Work is ongoing with the Group's auditors to finalise the value of amendments in respect of FY17 and earlier years.

· The cumulative impact of the non-cash accounting adjustments, across all historic financial years, is expected to have a material negative impact on Group equity as at 31 July 2017. It is not yet known whether there will be a material impact on the profit of the Group for FY17, due to the requirement to finalise the split between FY17 and earlier years.

· There is also likely to be a material impact upon the Group's reported revenue and accounting profit in the year ending 31 July 2018, with the absolute impact becoming estimable once the revised accounting policy is finalised.

· The Group's sole banking lender is aware of all related developments and discussions are ongoing with the bank. Should it become necessary, once the financial outcome is known and agreed with the Group's auditor, efforts will be made to obtain waivers of any retrospective breaches and amendments to the Group's relevant banking covenants in future periods.

· The Group currently expects to complete its year-end audit process in respect of FY17 and announce its final results by 31 January 2018. However, due to the volume of work required there is a risk that the audit will not be complete by this date.

· Further updates will be given to the market, with regard to the financial implication of the proposed changes in accounting policy and the date of the final results announcement, as soon as both are known with more certainty, as the work progresses.

JohnEustace

17th Jan '18

Genuine question - What does it take for trading to be suspended in a share?
Utilitywise (LON:UTW) seems completely uninvestable at minimum until the audit is complete.

gus 1065

17th Jan '18

If you really want to know, check out para 40 on page 14 of the AIM listing rules re. Suspension of Shares.

https://www.lseg.com/sites/default/files/content/documents/aim/2018/January/AIM_Rules_for_Companies_January_2018.pdf

Actually quite a short and sensible set of conditions. Essentially it’s required to protect “an orderly market” in the shares, which is quite a subjective test or where the company breaches the extensive listing rules. Presumably Utilitywise (LON:UTW) and their Nominated Adviser are of the view that they’re not in breach. Either way, I agree it’s a barge pole at the moment for all but the very brave.

Gus.

AnonymousUser252054

17th Jan '18

Commiserations to holders, I lost a lot here last year, too. I used to hyperventilate slightly when Paul Scott used to tear the company to shreds. I expect he may have some more to say today.... having said that, could there still be some value here?

LovelyLovelyGorgeous

17th Jan '18

LOL - no

gus 1065

17th Jan '18

At risk of making mischief, a highly respected commentator offered the following view on Utilitywise (LON:UTW) when the shares were trading at about 180p.

“I don't like their aggressive accounting treatment, but I'm happy that the debtor & accrued income figures on the balance sheet are probably pretty watertight. Therefore in my view the correct way to view this share is that it should be on a relatively low PER to compensate for the aggressive accounting, but it's not a bargepole stock.

Divdends are often the litmus test. Companies which are fiddling the books don't usually pay generous, and growing divis over a number of years. This company does.

Neil Woodford has gone over the figures with a fine toothcomb, as I reported here, and he's been a strong public supporter of this share. So if I have got it wrong, then am at least in good company. His funds own 26% of the company, so a serious vote of confidence there.

I believe that the accounting issues are well known, have been discussed here and elsewhere for several years, and are hence already in the price. To my mind this stock is more likely to re-rate upwards somewhat, and personally I've pencilled in a target price of about 50% above where we are today, so approximately 270p. In practice, I would probably sell at 250p, as it's not the type of stock that I would feel comfortable holding long-term.

So to summarise, I don't like it, but think it's cheap & likely to rise in price, which is why I own a few. The 4% divi yield whilst we wait isn't bad either.”

https://www.stockopedia.com/content/small-cap-value-report-28-oct-2015-gbo-utw-pos-109896/

Gus.

(To be fair, I took a similar view and bought a few at about the time this SCVR came out - eventually sold at a small loss. Well, we all make mistakes as the short-sighted hedgehog said climbing off the hair brush.)

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UTILITYWISE - AN AUGEAN STABLES?

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Bonitabeach

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