Bottom Line: Time for Tiphook to change at the top

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THE news from Tiphook, so far as it is possible to decipher, gets worse and worse. No wonder shareholders are losing confidence.

The company's efforts to comfort them backfired yesterday. It supplied a mass of information, prepared under both UK and US rules, but to no avail. 'Keep it simple, stupid,' is an old American adage that would serve Tiphook well as it moves to US accounting.

A sceptic might wonder whether the changes announced yesterday serve at least in part to divert attention from the performance of the business, which has been poor. American accounting cannot be blamed for misjudgements on interest rates, currencies or property.

Blaming the move to US accounting for all the losses is not altogether convincing. If Tiphook had to revalue its US dollar contracts last year because of the switch, why did it also revalue them in the previous year?

There are so many unusual items in the accounts - ranging from a provision against the head office, bought after year- end, through 'finance breakage' costs to charges for an employee share ownership plan, which has debts of pounds 29m guaranteed by the company - that shareholders must ask why so little about Tiphook is simple and straightforward.

The plain fact is that Tiphook is not making enough money. It relied heavily on book profits on the sale of old assets - to the companies from which it is buying new assets - to inflate the bottom line last year. Without these it would have made just pounds 38m on a UK basis.

Moreover, the company continually has to run faster to stay still, buying expensive new assets to keep its tax charge at the low rate it enjoys, because of the whopping capital allowances it can claim. Meanwhile it has to service the pounds 1bn of debt that is balanced precariously on shareholders' funds of just pounds 215m.

Tiphook's wildly gyrating share price, the stock market investigations into insider dealing, the constant surprises - it all adds up to a company the market has reason to be wary of.

The company would be far better off - like its rival, TIP Europe - as part of a bigger, better-capitalised group. That is unlikely to happen while the present management is in place, so Tiphook will remain under a cloud. Investors and the non-executive directors - who include Baroness Thatcher's former foreign affairs adviser, Sir Charles Powell, as well as Rupert Hambro and the 80-year-old Kenneth Dick - should call for change at the top.

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