The scandal over the privatisation of the vehicles owned by London and Lincolnshire fire brigade is a never ending saga. First the company pulled out of the UK to concentrate on the Middle East and then sold its London assets to a baronet for £2 only to have them taken over by Babcock in an emergency deal by the London Fire Brigade. ( see previous stories on this blog).
Now with a new interim report from the firm the real cost to the people who invested in a” couldn’t fail” take over of public assets is revealed in the balance sheet.
And astoundingly the chairman of the rump company, Dr Tudor Davies has now admitted publicly that the PFI deals with the London and Lincolnshire fire brigades to take over and replace all the brigades’ engines were based on a ” flawed business and financial model.. without any reasonable prospect of shareholder value.”
For the public record this is his signed statement in the latest interim accounts:
“The new Board has been considering claims to recover value for shareholders given the very significant decline in value following the four separate fundraisings amounting to £53m between 2009 and 2011 when, from the published accounts it appeared the Group’s financial position was satisfactory.
“As explained in the 2011 Annual Report, the massive restatements to the 2009 and 2010 financial accounts and the requirement for a Scheme of Arrangement subsequently showed a very different situation, and the differences arose from the UK businesses. The funds raised between 2009 and 2011 had primarily been utilised in support of an apparently flawed business and financial model associated with the UK vehicle leasing and maintenance business, without any reasonable prospect of shareholder value.
“Following expert advice, the new Board is at the early stages of pursuing claims against those associated with the past for in excess of £50 million.”
His proposed launch of a £50m claim against dismissed chief executive John Shannon and chief financial officer, Frank Flynn, among others who quit, may have little chance of success. As this blog has already reported Shannon is selling his mansion in Northern Ireland and was on the way to be declared bankrupt. Flynn’s fate is not known.
But the figures speak for themselves. The accounts reveal that by offloading the company’s UK assets to the baronet, Sir Aubrey Brocklebank, some £84m of losses was averted. Last August net liabilities were £51m for the two fire brigades and that was after creditors had to settle for a £4.9m payment – losing around 78 per cent of their investments.
Shareholders lost virtually all their money – when the shares were reduced to junk statues – some 300 times below their best value.
Shares are still trading in the remainder of the company which now is exclusively providing fire services in Abu Dhabi in the United Arab Emirates where it has made a £3m profit. One wonders what Arab Investors would make of the shennaghins in the UK if they knew the full picture.
The lesson of this privatisation exercise seems very clear. It was bad for public services in London and Lincolnshire, bad for the banks and other big investors and even bad for the ” get rich quick ” small shareholders who lost most of their cash. Anybody who thought they were going to make a quick buck out of the emergency services should think twice.