Inter-Alliance, one of the UK's largest independent firms of financial advisers, took hundreds of its staff and their spouses on a week-long paid trip to Mauritius at a cost of up to £800,000 in April this year, just weeks before issuing a profits warning to the Stock Exchange.
The "conference", at the luxury Sugar Beach Hotel, was organised for up to 200 of the group's top-performing advisers, managers and three unnamed board members, plus an equal number of their husbands and wives.
Only the previous month Inter-Alliance was forced to raise more than £12m from its shareholders. In May, the company's annual accounts showed it was losing more than £2m a month in the second half of last year. It subsequently issued a profits warning in June and announced a further capital-raising exercise in July, this time for £15m.
Staff at the Sugar Beach Hotel, which covers 20 acres of landscaped tropical gardens and boasts five restaurants and three bars, said that about 230 double rooms were booked for the Inter-Alliance party. Travel experts familiar with organising incentive trips of this nature said a basic trip to Mauritius, involving travel and half-board, would generally cost about £2,000 per head, excluding any additional meals or evening entertainment.
Justin Bates, a financial analyst at Numis Securities, said yesterday: "This sends completely the wrong message to shareholders. One would have thought for a company that is burning cash at a rapid rate, taking away several hundred people to Mauritius is not a sensible thing to do with its dwindling reserves."
David Pannell, director of research at Durlacher Securities, said: "The trip sums up what went wrong at Inter-Alliance. Re-establishing credibility with investors could take a long time."
Inter-Alliance, whose head office is in Swindon, runs a network of some 1,200 independent financial advisers, from 17 offices throughout the UK. Attendance on the holiday to the Indian Ocean resort was offered to any advisers, and their spouses, who could meet a target of £100,000 in commission earnings throughout 2002. After Inter-Alliance's takeover of another firm, HST Financial, in August last year, its advisers were told they and their spouses would qualify for the trip if they met a pro-rata target of about £42,000 by the end of the year.
Carey Shakespeare, Inter-Alliance marketing director and a member of the company's board, confirmed the "sales conference" for advisers and their managers took place. Mr Shakespeare said: "Sales incentive schemes are a recognised mechanism for encouraging and rewarding exceptional performance in a sales environment."
The Inter-Alliance board felt that to scrap the trip would have had a "detrimental effect" on the group and its advisers, with the cost of cancellation being nearly as much as going ahead, Mr Shakespeare added.
Inter-Alliance floated on the Alternative Investment Market in 1998. Its share price, which peaked at more than 370p in late 2000, fell to barely 100p at the beginning of the year, before plummeting in the wake of its profit warning. Its shares stood at 3p yesterday.Reuse content