More pickle?
Jul. 7th, 2009 02:37 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
peterbirksA week might be a long time in politics, but fifteen months is no time at all in the land of corporate reporting. Virgin Holdings which includes a 51% stake Virgin Atlantic and the Virgin rail interests, (an old but revealing portrait of how Brnason and the Virgin companies tie together can be found here http://docenti.luiss.it/boccardelli/files/2009/05/15virgin.pdf) has just now released its numbers for financial year 2007-08. Richard Branson did not hold a personal press conference to do it.
Virgin Holdiongs managed to report a one-off loss of £324.3m (net loss for VH in the period = £227,3m) for the year, because it finally had to book the losses that Virgin Megastores had accumulated over the years. Although Virgin Holdings had revealed those losses in its previous statements, it hadn't written them through to the bottom line. It had "rolled them over" on the grounds that Virgin Megastores would make it back in the future. When the pile of crap was sold to Zavvi, that was no longer an option. Hence the one-off loss for that year.
Those accounts also reveal that Virgin paid Zavvi £61m to break a licensing agreement for the use of the brand name.
There's more mess at Virgin Holdings. Virgin Bride, launched to much fanfare (personal appearance by Richard Branson in bridal gown) in 1996, was sold off for a quid after its one remaining store was shut.
But, complicated though Virgin Holdings is (and complex though the structure of Branson's own holdings in that company are, with various offshore trusts comeing into play), this is only part of the story.
Barfair is another Virgin Holding company. It has the drinks and holiday businesses. It made money last year, but it promptly lent twice the £55m it made to Virgin America. Barfair theoretically has net debts of £1.4bn, but Virgin said that much of this sum is inflated by "inter-company loans".
Ah yes, inter-company loans. And what might the details of those be? Well, once again, that's where it gets complicated. Inn fact it's only when there are significant minority shareholders (such as the poor stiffed Singapore Airlines at Virgin Atlantic) that we mere innocents can get some idea of what is really going on. There are 200 operating companies in the Virgin Holding web, and 150 more in Virgin companies outside that umbrella. The ability to roll over losses clearly helped Virgin Holding to 'profit' of £87m in 2006, despite losses at Virgin Drinks (makes of the scrumptospewlicious Virgin Cola) and Virgin Bride.
The real question is, does Virgin make money at the operating level? And my strong suspicion is that, no, it does not. Branson survives by buying and selling shares in those companies. He also makes money from licensing the brand name (although even this is now looking shakier), and also he survives from the "money tomorrow" concept (see NTL/Virgin Media), which can cover a plethora of sins under the phrase "R&D". This can actually work. He raised £800m when he sold Virgin Mobile and gained a stake in NTL. If another stake in NTL were to be sold for a greater amount, then Branson would have made a "profit" on the deal, even if the company itself had made no operating profit at all.
Virgin undeniably has assets, but much of that could be seen to be the Virgin name, while a significant minority could be seen to be Branson himself -- free advertising for the asking.
And Virgin has sustained this model for going on for 40 years now. Is it sustainable? We shall see.
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Virgin Holdiongs managed to report a one-off loss of £324.3m (net loss for VH in the period = £227,3m) for the year, because it finally had to book the losses that Virgin Megastores had accumulated over the years. Although Virgin Holdings had revealed those losses in its previous statements, it hadn't written them through to the bottom line. It had "rolled them over" on the grounds that Virgin Megastores would make it back in the future. When the pile of crap was sold to Zavvi, that was no longer an option. Hence the one-off loss for that year.
Those accounts also reveal that Virgin paid Zavvi £61m to break a licensing agreement for the use of the brand name.
There's more mess at Virgin Holdings. Virgin Bride, launched to much fanfare (personal appearance by Richard Branson in bridal gown) in 1996, was sold off for a quid after its one remaining store was shut.
But, complicated though Virgin Holdings is (and complex though the structure of Branson's own holdings in that company are, with various offshore trusts comeing into play), this is only part of the story.
Barfair is another Virgin Holding company. It has the drinks and holiday businesses. It made money last year, but it promptly lent twice the £55m it made to Virgin America. Barfair theoretically has net debts of £1.4bn, but Virgin said that much of this sum is inflated by "inter-company loans".
Ah yes, inter-company loans. And what might the details of those be? Well, once again, that's where it gets complicated. Inn fact it's only when there are significant minority shareholders (such as the poor stiffed Singapore Airlines at Virgin Atlantic) that we mere innocents can get some idea of what is really going on. There are 200 operating companies in the Virgin Holding web, and 150 more in Virgin companies outside that umbrella. The ability to roll over losses clearly helped Virgin Holding to 'profit' of £87m in 2006, despite losses at Virgin Drinks (makes of the scrumptospewlicious Virgin Cola) and Virgin Bride.
The real question is, does Virgin make money at the operating level? And my strong suspicion is that, no, it does not. Branson survives by buying and selling shares in those companies. He also makes money from licensing the brand name (although even this is now looking shakier), and also he survives from the "money tomorrow" concept (see NTL/Virgin Media), which can cover a plethora of sins under the phrase "R&D". This can actually work. He raised £800m when he sold Virgin Mobile and gained a stake in NTL. If another stake in NTL were to be sold for a greater amount, then Branson would have made a "profit" on the deal, even if the company itself had made no operating profit at all.
Virgin undeniably has assets, but much of that could be seen to be the Virgin name, while a significant minority could be seen to be Branson himself -- free advertising for the asking.
And Virgin has sustained this model for going on for 40 years now. Is it sustainable? We shall see.
________
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Eminences Grises
Date: 2009-07-08 06:30 pm (UTC)However, you can't keep this sort of thing going for that long without a very, very smart bunch of people in the back room. Madoff had his little man down the street. Stanford had his man in a smelly office in Chiswick, or wherever it was.
Who does Branson have? Where are these Masked Men?
I mean, if there's any justice in Red Blooded Capitalism, the little fuckers should be billionaires by now. (And no, I don't think Sir Richard is remotely clever enough to pull this sort of thing off by himself.)
Re: Eminences Grises
Date: 2009-07-09 09:37 am (UTC)http://www.independent.co.uk/news/business/analysis-and-features/you-couldnt-call-sir-richard-branson-coy-so-why-all-the-secrecy-at-virgin-616523.html
It uses different auditors at different companies and, unlike other "complex" companies, there's no "real" centre where any operational black hole might be tucked away, if it exists.
Virgin, rather more cleverly, seems to use the "speed and time" method. Keep the money moving and file accounts when it's convenient so to do. If you file accounts for one company eight months earlier than for another company ... well, you get the picture for possible abuse in "inter-company loans". There's no proff that this is happening, just the circumstancial evidence, that being:
1) 350 separate companies, several holding companies, and a complex ownership structure of those 350 companies and their holding companies
2) Different auditors
3) Different times of filing company accounts
What one can conclude from this is that if, just if, there are operational losses at particular companies that you want to hide, it would be relatively easy so to do. That it took several years for the real losses at Vigin Megastore to be written to book (thus impacting the numbers at Virgin Holding) is an example of this.
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