Tuesday, 20 January 2015

Flashback ... Connaught (CNT ... delisted)

Tuesday 20th January 2015

Aside from the increasing regularity and size of restructuring charges, ramp up in net debt, frequency of acquisitions, strange looking software capitalisation, and a few other items, one of the key flags pointing to trouble brewing at Connaught was ...

... the sudden rise in the amounts recoverable on contracts that began to be shoved in with non-current assets on its balance sheet. These actually constituted all of its trade receivables, which were classed as non-current.  
Connaught's amounts recoverable on contracts classed as non-current assets, £m
Source: Connaught annual reports
According to Connaught's 2009 annual report: 
Amounts recoverable on contracts represent the estimated amounts which have been earned or which valuation, under the terms of the respective contracts, have not yet been agreed with the customers. These amounts have been included at their estimated recoverable values. Included within accounts not yet due is £27.8m (2008: £12.6m) which reflects accounts which are recoverable over the period of the contracts to which they relate. Accounts which are over six months overdue and are still to be agreed by the customers are prudently valued at their estimated written down recoverable value.
Connaught's long term trade receivables pretty much went from zero at year end 2006, to £27.8 million in the three years to 2009.

Here is Mystery Company X's record of its amounts recoverable on contracts and other trade receivables classed as non-current over recent years. 

Mystery company X's amounts recoverable on contracts and other trade receivables classed as non-current, £m
Source: Mystery company X's annual reports
I am short Mystery Company X.

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2 comments:

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