RSM Tenon: Split from auditors and move on

by Kevin Reed

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03 Apr 2012

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THERE HAVE BEEN a few sniggers, some tutting heads, and chequebooks lined up among the profession over RSM Tenon's plight.

Some have found the situation amusing, many more have offered their opinion on how the firm got itself into such a mess, while others have told me about their tentative discussions over the potential sale of certain offices.

I, for one, am sad about the tough going ahead for its staff. I'm certainly not suggesting they should up and leave - the grass isn't always greener and new CEO Chris Merry will be driven by a number of factors to tidy up the firm as quickly as possible.

What will make him move quickly? The overarching issue will be his duty to create value for shareholders - or should I say try and recapture some value, with shares trading at 8.44p from 37p a year earlier.

Secondly, as I've mentioned already, he will want to keep the best staff and of course don't forget clients. Uncertainty isn't conducive to retaining either of these groups.

Current lenders Lloyds are due repayment on £88m of debt on 31 October. Renewing this facility with Lloyds, or negotiating with another lender, will naturally start before then.

Headcount reductions and efficiency savings are painful, no doubt about it. Perhaps interim restructuring ‘overseer' Donald Muir will have to play the villain on this front, leaving management free to place the business back onto an even keel.

What the whole profession should be disappointed about are the accounting issues Tenon has faced, and the unseemly argument that has been anonymously revealed in the press with its auditors PwC.

If between them they can't cobble together a decent set of numbers then I'm at a loss.

But their spat, which sees to involve the two blaming each other for Tenon's restatements, has the potential to be more damaging to the listed firm than the various other issues it faces.

Whether PwC were in part responsible for the restatements or not, I think Tenon should take it on the chin and move on.

It's tough enough for the firm that, as a publicly-listed entity, it must make statements to the stock exchange. If information over its argument with PwC has leaked once, it will again as the situation progresses. If anything will make it difficult for the firm to retain clients or win new ones, I believe it's this.

With relations as strained as this I'd be very surprised if PwC remains as auditors for much longer.

Part company, I say, and let's see Tenon focus on turning around.

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