By Tom Winnifrith, The Sheriff of AIM | Wednesday 19 October 2016
If you thought that the accounts of some of the crap Roland "fatty" Cornish floated on AIM smelled bad, you need to look at the annual report of his own firm Beaumont Cornish Limited. I shall be urging both the FCA and the HMRC to have a butchers as it looks well iffy. But if you have lost a packet in any, or all, of the junk Fatty has floated or acted for - not least Daniel Stewart and New World Oil & Gas - you will be delighted to know that in 2015 his "takings" from dividends alone were £270,000. How's that for transferring wealth from the 99% to the 1%?
The calendar 2015 accounts are bizarre. They are abbreviated smaller company accounts so we only have a balance sheet which looks like this
|Year to 31 December||2015||2014|
|Creditors Due within One Year||£544,179||£577,969|
|Net Current Assets||£314,159||£180,791|
|Implied profits in year||£146,203||£30,29|
However if one goes to the notes to the accounts for 2015 one sees that in 2015 fatty - who owns most of the equity - took out dividends of £270,000 ( £90,000) while minority shareholder, little brother, Michael took out dividends of £28,275 (£9,425).
Even more interesting is that the firm has been lending both Fatty and little Michael cash for years. The loan numbers are a staggering:
|2015 y/e||2014 y/e||2015 maximum||2013 y/e||2012 y/e|
These loans made to Fatty and his brother are classed as current assets ( ie repayable within 12 months ) at each and every year end. This begs three questions.
1. If the loans are in fact not repaid at each year end as indicated year but are in fact added to with a clear year on year progression surely it is misleading to treat then as current assets. More importantly surely, post the 1965 reforms, surely HMRC should be treating them as income. Have Fatty and young Michael sent of cheques equating to 40% of the loan amounts? I shall be asking HMRC as to whether it thinks it is owed c£200,000, plus interest by Fatty and c£20,000 plus interest by young Michael.
I assume that Fatty takes a de minimis salary. But over the past years it appears that Fatty has taken out £597,063 of cash on which he has almost certainly paid no tax at all and £360,000 on which he will have paid c20% tax so on c£1 million of cash removed from BC fatty will have paid a blended rate of 7.5% tax. As you pay your tax bill via PAYE this month do you regard that as acceptable? Or as an unacceptable face of crony capitalism (at best). Let's just let HMRC look into it.
2. The company appears to have paid out dividends of £397,700 but distributable reserves as at the end of 2015 were £178,263. This means that in order not to have broken the law at the time of paying the dividend ( one assumes that this is pre May 3 2016 when accounts were filed) Beaumont Cornish must have racked up unaudited profits of at least c£220,000.
Well luckily for Fatty he floated Gate Ventures in March 2016 and awarded Beaumont Cornish a shed load of warrants which he said - in the prospectus - would not be exercised for a year. Roland Fatty Cornish is aman of honour and his word is his bond so he promptly exercised themn within weeks of the IPO netting a gain of £400,000 as he sold the shares and then after waiting a few weeks he quit so forcing the shares off AIM. Call that £300,000 after tax and hey presto, unaudited distributable reserves to fund a mega dividend. I suppose the only question is what dividend would Fatty have paid if he had not ignored what was written in the prospectus and did his need to create a distributable reserve prompt him to somehow get AIM to allow him to breach a prospectus promise.
3. How does a company with no cash have enough regulatory capital to maintain an FCA license? I assume that it is allowed to treat its current assets as cash. But hang on of the 2015 current assets the vast majority was cash owed by the Cornish Brothers which they never seem to repay. Who knows if they could repay on the spot as I suspect Reg cap rules dictate. Net current assets excluding the cash loaned to Fatty & Michael would be MINUS £330,987. No w even if part of creditors were the promised 2015 dividend payments of c£299,000 and one might strip themj out that would still leave Negative Net Current Assets. Calculating whether a regulated firm has enough regulatory capital to keep trading is a complete nightmare of a job which I would not wish on my mother in law or even on Cherie Blair or Crooked Hillary Clinton. But do you think I should ask the FCA to have another butcher's at the Beaumont Cornish return for last Christmas?
Meanwhile I hope that you have all emailed the hapless head of AIM Regulation, bogus Sheriff Marcus Stuttard demanding that Fatty lose his Nomad license for the New World fiasco, as I urged you HERE.
Now, where do I find the contact details for the HMRC asking that it turn its attention to Fatty?
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