Knight Square Holdings have published their 2015 results.
At first sight they appear to be quite encouraging for them, but as ever the devil is in the detail. Until other group accounts are published, this can only be a snap shot of their true position as they can transfer liabilities between group companies.
So the headline figures show an increase in turnover up from 71.3 m to 74.4 m and a profit of 5.8m.
Their retention rate has improved from 95% to just under 97%.
Funds held in service charge accounts have increased from 220m to 236m.
Starting with the retention figures, a 97% retention rate might sound good. But that still represents a loss of around 110 developments in 2015. Given how Peverel/Firstport were appointed to manage the developments and the objections that are routinely raised to any RTM it is no surprise their losses are not greater.
That turnover and funds held in service charge accounts have increased is of great concern.
Logic dictates that since there are fewer developments under management, the turnover should have fallen as should the funds in service charge accounts.
But the reverse is the case. this can only come about if Firstport have found more aggressive ways to monetise their assets. This normally comes about from hidden charges, increasing charges, double charging items that come under the management fees and then invoicing the same item in the service charge demand.
It comes about when unfavourable terms for utilities are negotiated which enhance bulk purchase rebates which are retained by Firstport at the expense of residents.
And let us not forget the invented work for such things as bogus roof surveys, call system upgrades and LED conversions. Nor should the house manager flat sales be forgotten and the deceptive practices used to encourage residents to vote for an end to live in house managers.
Firstport know the method they must employ to get away with this is to increase the level of service charge funds first. If work is being undertaken, much heat is taken out the situation if the Development Manager can say "The money is coming out the reserve fund, so you have nothing to pay", rather than having to demand 100 pounds from each resident.
There is some confusion over the number of staff they employ, as the figures have "changed"
If we look at the 2015 published figures, the number of employees in 2014 is given as 3240. This figure drops to 3168 in 2015. That is a net loss of 72 staff. Yet if we now look at the actual 2014 staffing levels, the figure given is 3,604. A loss of 436 people.
Many of the staff lost had many years of property management and were replaced by former mobile phone salesmen with no experience in property management.
The value of Firstport has increased, by virtue of one of their periodic revaluations. So their property investments has increased from 21.1m to 25.2m.
It does not mean, that is the actual value, it is the directors opinion that it is the value. Certainly the uplift enhances their accounts and assists with their borrowing.
It is the borrowing levels that is the big problem for Firstport.
Every conceivable asset is fully pledged against the loans.
In 2015 Firstport re-negotiated their loan structure . The shareholders wanted to reduce their exposure to Firstport risks. RBS negotiated new facilities, doubtless encouraged by the 236m of resident service charge account funds deposited with them.
In 2015 Firstport were forced to pay 1.5m in interest charges to the bank
Firstport also had to pay 3.3m in interest charges to the shareholders.
Firstport also had to pay 312k fees for managing the loans.
Since Peverel/Firstport were "rescued" the interest charges for their shareholder loans have increased to 16.7m.
The bank loans now standing at 35m attract an interest rate of 3.75% above Libor, which is currently 0.99%. Compare that to a standard morgage rate?
It is a condition of the loan that 4m is repaid by October 2017 in 6 monthy installments of 1m.
Shareholder loans are charged at interest rates of between 9% and 15%. Plus Firstport have to pay the shareholders consultancy fees thought to be around 450k per year.
So unlike other property management companies, it can be seen just how much extra Firstport has to make just to service debts. The source of their income is from residents. This is why Firstport have to be ruthless in finding ways to exploit residents.
And this is why we must all unite to stop them.
