Auditors issue Vantis going concern warning

The shock going concern warning issued against Vantis this week has
highlighted a number of issues facing the firm.

Auditors Ernst & Young warned that unless Vantis can cut costs, manage
cashflow and finally receive payments for its work as liquidators of Allen
Stanford’s international business, its future is uncertain.

Advisers have questioned how Vantis finds itself in a position where the lack
of payment for its Stanford International Bank (SIB) work has contributed
towards the auditors’s warning.

Vantis said that it had put “significant resource” in its work recovering
assets from SIB. A freezing order on assets in the US, plus a delay in the
realisation of property assets, meant that Vantis was unable to receive fees for
its work during the half-year period ending 31 October 2009.

“The validity of the going concern basis depends on the group being able to
operate within its current banking facilities and covenants which requires the
successful outcome of the above,” said the auditors.

A spokesman for Vantis vigorously denied that the going concern warning had
damaged the firm’s reputation in undertaking big roles or that it had failed to
undertake appropriate risk management before bidding for the work.

“We have the capability, expertise and capacity to do this,” said the
spokesman. “It’s a project that’s worthwhile doing.” The firm’s reputation had
been enhanced by the Stanford appointment, the spokesman added, with its
business recovery division increasing turnover for the period by 43% to £17.4m.

Vantis’ new management team, led by turnaround expert and former KPMG
advisory boss Mike Wheeler, has begun a cost reduction programme and refinanced
its debts.

It is also waiting expectantly on the result of court decisions in the UK and
Switzerland in its battle to free up SIB assets.

Vantis said it was confident of recovering its fees “in due course” but the
most significant damage, if there is any, could be to the firm’s reputation.

Big ticket insolvency work is relatively rare and the effect the Stanford job
has had on Vantis may give future clients reason to consider their options
carefully.

Net debt stands at £40m for the firm, while its banking facilities and loans
have been increased by £8m to £52m.

The facility and loan, worth £33m and £19m respectively, mature in a years’
time – at which point Vantis will seek an extension.