Tuesday, 7 December 2010

Laughing or Crying

We have read several stories in the financial and business press recently to which our reaction was "you're having a laugh!"

Promethean promitheth much but deliverth leth
Promethean World an educational technology company floated on the stock exchange in March at 200p. Last week the shares were down to 52 pence after warning that full year results would be below market expectations, just 5 weeks after the CEO said he was confident of delivering results in line with market expectations. Shareholders who were persuaded to support the IPO are nursing a £291m loss.

Promethean make and sell "interactive learning technology", electronic whiteboards and the like. Now it doesn't take a genius to work out that its sales revenues are highly dependant on the education sector. So with governments everywhere cutting expenditure it also doesn't take a genius to conclude this was likely to be a highly risky investment and probably one to avoid. Not a view shared by the clever people investing our pension savings it seems. To quote one major institutional investor "This sort of thing just shouldn't happen. It is just giving IPOs a bad name". You're having a laugh mate, it gives you a bad name. You are the prat who will invest our money in any dog of an investment that big investment banks (in this case Goldman Sachs and JP Morgan Cazenove) wave in front of you.

Incidentally of £104m new money raised £90m paid off loans from private equity firm Apax partners plus £8.5m fees to the two banks. Time to laugh or cry?

Wot no bonus!
A survey of finance sector pay rates published last week found that the average salary for junior staff at London Investment banks will be around £97,500 this year. This is a 20% increase caused by employers replacing bonuses with higher basic salaries. However the survey also found that these staff were not fully aware that the salary increases would have an adverse effect on their annual bonuses. In other words they are expecting the salary increase AND the same level of bonus as before. You're having a laugh, just how stupid are these people. Stupid enough to buy shares in IPOs like Promethean World apparently.

FSA still SFA
Readers of the articles in this series will recall that we have applied the acronym SFA to the Financial Services Authority because that sums up their achievements to date. There have been some signs of life but the refusal to publish the report on the near collapse of RBS shows that nothing has changed. The FSA claims it is prevented from publishing by section 348 of the Financial Services Act which say that "confidential information must not be disclosed". With the taxpayer the largest shareholder in RBS only the FSA would find this a justification for doing nothing. Or are they afraid of what the report will reveal about its own non performance in the whole affair?

At the same time we have the collapse of Crown Currency Exchange. This currency trader was FSA registered and carried the logo on its website. However Peter Benstead its CE has a string of failed businesses on his record and was banned by the DTI as director in 1998. He was actually convicted of theft in 1980 so technically should not have been able to be a director of an Unregulated Small Payments Institution, which is how Crown Currency operated. Read more about this in Jonathan Russell's and Annie Shaw's article in the Sunday Telegraph at http://bit.ly/dWBHuO .

So FSA? You're having a laugh, still SFA.

Thanks but no thanks Natwest
Finally did you see the advertisements from NatWest at the weekend? Headed "We're here to help whatever the weather" the new customer caring NatWest with its shiny new customer charter is offering to increase overdraft facilities for customers whose cashflow may have been impacted by the weather conditions. Looks good doesn't it? A bank actually thinking about its customers' problems and offering to help. Well not quite. The interest rate they will charge is 19.89% EAR, that's 39 times the BoE base rate. You can find credit cards that will charge you less than that.

"Here to help" you're having a laugh, here to help yourself more like.

Business Bloop Award is brought to you by Steve Goodman and Tony Ericson of Business Breakthrough Coaching. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. We publish regular articles using a recent business/financial topic to highlight different perspectives and conclusions to those obtained by conventional thinking and techniques. You can read the other three blogs at "Exceeding Expectations," "Business Bloop Award" and "Capitalism or ... Common Sense".

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