Tuesday, November 26, 2013

‘Legacy projects’ and some tips for Leighton’s auditors…

Most people that read my writings know that English is not my native language.
Lots of them often compliment me, how they think I have a reasonable command over it.
Still, every time I set out to do any type of research that involves Leighton Holdings or its subsidiaries; my understanding of the English language is put to a major test;

Take, for example this statement from their website:
Continuous disclosure of the Group’s activities is a legal necessity for a publicly-listed company such as Leighton Holdings, and is essential in maintaining shareholder confidence and market trust.”

Are they kidding me? Or is this really serious?
I can scroll through hundreds of pages of reports, media releases and whatnots and still have absolutely no confidence that this is not just a carefully crafted PR blurb set out to manipulate me.

OK, maybe not me, I have too much inside knowledge, but everyone else, the media, present and future shareholders.

Still, even without having 'insider knowledge', it is hard to imagine that anyone will fall unquestionably for these publications that are closer to highly made-up political campaign-boards then serious company reports that one can trust.

The one area that I know a bit more about than the others LH operates in, are the workings of HLG (Habtoor Leighton Group in the Middle East);
So, naturally, I look for anything that is relevant to the performance of this subsidiary as I read their ‘reports’.
In one of the latest official reports the writing is ‘world-class’;
Reads almost like a school report;

Habtoor Leighton Group (HLG)
The Group’s business in the Middle East, HLG, showed some signs of improvement. (1) HLG achieved a break-even result during the first half and recovered funds from UAE legacy projects. (2) The region’s macroeconomic environment has stabilised and a robust pipeline of projects is being pursued. (3)
The decision of a Qatar-based client to call bonds on certain legacy projects delayed HLG from making repayments on Leighton’s outstanding shareholder loans during the period. HLG believes its legal position on the matter is strong and it is working to a resolution. (4)
HLG’s focus continues to be the collection of receivables and ‘IPO-ready 2016’ remains the target. The business is diversifying its sector and geographic base, and it continues to secure new work.

Naturally and unfortunately I have no access to any of the full financial reports of HLG (oh, how I wish I did) to scrutinise them in any detail;
Also, and sadly, for what I learned over the last couple of years of the media (global or local) outlets, it is also unlikely that any of them will any time soon seriously investigate what these guys are up to; (apart from a couple that may yet come up with the goods, wait-and-see);

Still, aren’t there some ‘paid’ auditors employed by these and other listed companies, that have the professional responsibility to question what these companies are doing and publishing on the way?

I really wish they did, but honesty, I’m not holding my breath. And if the current auditors are listed somewhere on Leighton’s website with their contacts, sorry, I did miss them, otherwise I would have given them a bit of free publicity just as I had done for Deloitte & Touche in my post yesterday.
Regardless of my omission, here are a couple of pointers to look into for those auditors, all based on the short paragraph published by LH above and related to the performance of HLG:

1 – really? I worked there for exactly two years; a large group of highly paid professionals was constantly working on a large number of bids that never eventuated into real projects for HLG.
All projects won that I had some insight into (at least 4) were either terribly late, over budget or both;
2 – really? Can these ‘legacy’ project be listed one-by-one? Projects post-merger with Habtoor (i.e. since HLG was born) can technically not be called legacy project, or can they?
3 – really? Would any of the company’s management be prepared to bet personal money on any of the current ‘phantom bids’ eventuating into real projects? Can this ‘robust pipeline’ get quantified?
4 – really? Based on what? A media war on a weaker media player with a much stronger ‘factual’ case in hand?

As I shift my weary eyes from this sad, sick, corrupt industry to the media that is supposed to keep it in check, I can’t help but end up looking for the ‘auditors’ that seem to failing also in what they are supposed to be doing and creaming the process financially yet sailing away unscathed.
They are definitely not very technically savvy if they are prepared to allow their audited parties to carry on like this (or they can be easily bought, God’forbid) and they may feel to be in the right zone by covering their own butts with lots of ‘small print’ at the end of their  reports freeing them of any and all responsibilities from the wrong doings of their clients.

In my mind, - and happy to stand alone holding this view – no small print will free them being a party to something that can be classified confidently as a ‘large scale crime’.

(picture came from a cafe street board)

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