As a motor sport fan, I was saddened to see the announcement this week that Lola Cars were to be placed into administration.
For those of you who are unaware of whom Lola are, they are a specialist sport car racing firm based in Huntingdon. Cambs.
Founded in 1958 by Eric Broadley MBE Lola Cars celebrated its 50th anniversary in 2008 It has an illustrious history, designing cars that competed in Formula One, the Indy 500 and Le Mans.
Having built more customer racing cars than any other constructor in the history of motorsport, Lola now also services the aerospace, marine, automotive, defence and communications industries with a complete design and build capability in advanced carbon composites.
Employing a highly skilled engineering and design workforce of some 175 staff; this is exactly the type of company that we need in Great Britain, so what went wrong?
The issued statement is that HMRC failed to pay R&D credits and along with an economic backdrop of uncertainty this led to cashflow problems.
Somewhat harsh perhaps but I think that this is a smokescreen and in due course it would not surprise me if Lola Mk2 emerged (or rather Mk3 as they have previously been placed in administration in1997) with familiar faces in place.
To my mind it is the Directors who are at fault, any strategic decision, ultimately rests with them and if that decision takes the organisation down a blind alley with no protection from the aforesaid decision then the consequences roll.
A balance between risk and opportunity is the road we tread daily but this is a salutary reminder that the firm belongs to the shareholders, no doubt if your appetite for risk, if you’re reading this as a Finance Director, will be substantially less than that of your co-Director in sales; I do think it’s a point worth reflecting on –where do you stand and is risk adequately balanced within your board?
A few weeks ago a Client asked me to examine the books of a leather goods manufacturer that had gone into receivership, with a view to valuing and offering a price to purchase.
The company was small but I placed a valuation of some £30k. I was subsequently staggered to hear that a valuation of £90k had been muted. When I questioned the basis for that figure, the nominee said because of the opportunity that it represented. Not so in my books, it’s about managing the downside to the risk if it doesn’t work out. Our offer didn’t proceed based upon other findings nor did the £90k get bid and the assets and books were subsequently sold for £25k.
Another point that I raise, is the age of a business a good indicator of its likelihood of survival? Is not the longevity of the board members in that role, of greater merit?
I think of the headline stories in the Sunday Times Business section el al, of the latest career hopping Chief Exec to some of our household names and I am left with the feeling that an indigenous industry expert would bring far greater shareholder value.
Lola Cars and Lola Composites are part of a larger group, there is more to this than meets the eye but I would be disappointed if the Administration was just a Creditors sidestep; HMRC included. I would like to think that that Lola board are of greater stature than that. A statement is due on the 21st of this month it will be interesting to hear the administrators findings and I wonder where in the commentary we will find the words strategy and risk?