RSM Tenon posts £100m loss but agrees new lending terms

by Rachael Singh

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17 Oct 2012

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RSM Tenon

RSM TENON'S latest results show more than £100m in operating losses and its workforce reduced by nearly 400, but it has managed to agree a two-year banking facility.

In the latest results for the financial year to 30 June 2012, RSM Tenon has posted an operating pre-tax loss of £101.8m.

The firm also saw through its previous announcement to reduce the workforce by 10%. In the last year, it lost 338 staff, roughly 10.8% of its employees. This has resulted in £17m of exceptional costs and leaves Tenon with 2,799 staff.

However, the firm managed to secure a £93m banking facility until 31 December 2014.

The loan is broken up into five parts. The first is a £50m loan with an interest rate of 475 basis points (bps) above LIBOR; the second is a £20m loan at 675bps above LIBOR; an £8m overdraft facilities at 675bps above the bank base rate; £13.5m revolving credit facility repayable at 1350bps above LIBOR which will reduce to £10m on 1 July 2013 then £7m on 1 July 2014; and another overdraft of £1.5m with interest of 1350bps above the bank base rate.

The £20m loan shrinks by £500,000 each month from 1 July 2014 to 31 December 2014.

Earlier this year, the listed firm ran into trouble when accounting irregularities were discovered and it had to restate accounts, reduce its workforce and make several cost savings, and only managed to secure credit facilities until 31 October. It also introduced a new board which includes chairman, Tim Ingram, and chief executive, Chris Merry.

Ingram said in an announcement to the stock exchange: "To say that the year ended 30 June 2012 was a disappointment would be an understatement; this year has been totally unsatisfactory for shareholders and other stakeholders.

"The results speak for themselves and are commented on in more detail below, but it was unacceptable to have allowed a situation where costs had grown to be in excess of revenues, and bank indebtedness had become a multiple of the company's market capitalisation.

"Although the external economic environment has not been helpful, the main reason for this state of affairs is that the business had in the past simply not been managed in the way it should have been.

"Of critical importance are the changes that have been, and are being, made to enable the business to provide the profitable returns that it should – and can – provide for shareholders."

According to the latest results, the firm has made cost savings of about £20m – significantly higher than the estimated £14m it proposed in February, following the discoveries.

However, net debt increased to £79.5m in 2012 from £73.1m in 2011. This is made up of £78.3m for RSM Tenon group (up from £68.2m in 2011) and £1.5m (down from £4.9m in 2011) for a separate legal entity, RSM Tenon Audit – which is guaranteed by the group. Combined debt at both entities amounts to £79.5m.

Operating charges came in at £118.6m, with £63.7m attributed to a goodwill write-down and more than £4m used for changes in the firm's financial management business, following an FSA settlement in 2010.

Chief executive Chris Merry said: "We are focused on our clients and always put them first. We are making the right changes to bring the firm together as one RSM Tenon. We are in a stable financial position with bank facilities in place for the next 2 years. Publication of results is the end of a chapter: we are now looking forward with confidence".

Talking to Accountancy Age Merry said: "Overall the results have shown that the business is in a more stable financial position.

"We want to make sure the changes are fully embedded and stick. The business is now in good shape and we would like to focus more on how to grow. That is something we are very much looking at now, how to grow and consolidate our expertise rather than retrenching."

The results also showed that the firm closed its Harrogate, Telford and Wakefield offices and has recruited 115 trainees.

Chief financial officer Adrian Gardner explained the results this year were more detailed as the firm was making an "attempt to be more helpful to investors".

"We want to try to be as transparent as possible and have really made an effort to achieve that."

RSM Tenon also announced that Nicholas Page would join as non-executive director and chairman of the remuneration committee. He spent 20 years as a non-executive then chief operating officer at Travelex. Prior to that he was CEO of Hambros Insurance services and executive director of Hambros Bank.

He is currently chairman, and chairman of the remuneration committee at Care Europe SA, one of Germany's largest nursing and assisted living groups. 

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