Monday, November 25, 2013

A forewarning to Balfour Beatty’s auditors…

Creative bookkeeping and dressing up of annual reports to sooth worried investors into a ‘blissful state of contentment’ is a skillset one specialises-for over a lifetime.
A skillset, that is ‘not really my cup of tea’.
I prefer the pathological side of looking at these and other contractual documents and love the process of systematic unpicking of ‘one-liners’ within annual reports to see what exactly lies behind them.

Like, in the case of HLG (Habtoor Leighton Group) a private company owned partially by a public one and Gammon, operated under the guardianship of two listed entities.
Both currently enjoy being in a position of sitting at an arm’s length from the scrutiny of (possibly) rightly zealous representatives of institutional shareholders, thus often lulled into feeling that they are fully the masters of their own destinies.
And they get reckless.

Take Gammon, for example. You can walk the company’s corridors for months without feeling any influence of the major shareholders on how the company should be run, instead experience on your skin first-hand the deeply in-graved powers of decade-long ties between miniature kingdoms of long-term managers and directors.
Not that Gammon is unique in this behaviour.

To be honest, even after a number of decades of direct involvement with the corporate world, I’m not sure if auditors do more than just give their stamp of approval for whatever the management of the said  (audited) company have dreamed up.
When it comes to Gammon, I hardly expect it to be any different either, from what I know about the management and how they operate.
I can, of course hope for a better treatment this time and ask:

Will the auditors question the overheads of the dubious BIM group, bundled up in the 10ns of millions of (HK) dollars?
Will they ask why they hired me at the cost of hundreds of thousands of (HK) dollars, just to drop me after 11 weeks of service?
Will they call in the HR director for questioning? Get him to resign over this case?
Will they understand that on the MTR 1111 job, the contract is such that the ability to claim in the future is extremely limited, no matter what the directors' forecasts say and predicted cash flows show?
Will they question the person that signed that contract?
Or the one that refused to review it and put some basic risk management measures in place even after numerous prompts to do so?
The one that fired me over questioning the entire process?

Still, let me give the current auditors a tip: do look into this job in a bit more detail!
Interview the project directors, the executive director, the commercial managers and the BIM-director!
Watch them speak, see how they do make up their stories. Ask them about the ability for the company to claim for ‘unforeseable’ issues a year down the track, even two or three.
Ask them if their is a possibility of finding their hands tied in the future when trying to recover for money for extra work done because of their present less-affair approach for the client mandated BIM requirements as well as their total ignorance at the outset of the contract for the same?

Do your job. Dig deep!
Unfortunately, your reward for getting to the bottom of the case may be similar to mine and get dropped.
But you may get dropped regardless.
In which case you may save face. Yours and your company’s. Long term, that may be the better option.

Take this as an honest warning.

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