Helphire: how the mighty have fallen

Today, Helphire is a company commonly associated with terms like ‘profit warnings’, ‘job losses’ and ‘accounting errors’. Not always, though. In 2007, the Bath-based provider of vehicles to those involved in car accidents was flying high, with revenue of more than £290m and pre-tax profit of £40.3m.

Just what happened to a group that was once on the way to becoming a bit of a star stock on the London Stock Exchange?

Warning signs: 28 February 2008, interim results

There had been concerns over the weakness of Helphire’s share price, which was hovering around 300p in early 2008 from nearly 450p the previous summer. Another 100p was wiped off when Helphire missed profit forecasts in its interim results and announced extra debt facilities. The credit crunch was hurting and insurers were starting to question the costs of the post-accident car rental market.

Debt mountain: 23 September 2008, full-year results

To fund its impressive growth, Helphire had borrowed a fortune. Net debt reached £362.3m by the summer, so the company raised nearly £43m through a share issue to limit its dependence on loans. Although the final results showed that revenue continued to increase, outgoing chief executive Mark Jackson noted that the motoring market, and therefore the number of car accidents, was slowing as a result of the downturn and rising fuel costs.

Problems admitted: 13 November 2008, profit warning

New chief executive Mark Adams greeted the market with a management statement warning that profitability in the first quarter of the financial year was below expectations. With vehicles off the road as hires decreased, the group put a freeze on the acquisition of additional cars while some of the fleet was even sold off. Debtors – insurers, mainly – were also increasing the number of days they took to pay off what they owed. The following month the group said it was looking to introduce adopt a simpler business model that would reduce operating by £5m a year.

Staff axed: 18 February 2009, equity raising

Richard Rose, the restructuring expert brought in as chairman at the start of the year, tested the patience of investors already dismayed that their stock was now worth less than a tenth than a year-and-half before by raising £50m from institutional shareholders. The fundraising was a condition of the group’s banks, if they were to agree to further lending. Helphire needed to shore up its balance sheet and another way of doing so was cutting jobs. Around 130 staff were set to go – one of which turned out to be Adams, who left in the April.

End of Saga: 24 July 2009, trading statement

Restructuring was in full swing, with Rose vowing to concentrate on the core vehicle hire business and, as a result, sold specialist jewellery claims business E-Register. A new management team was in place and Project Century, a plan to cut working capital by £100m by the summer of 2010 was seemingly ahead of schedule. Then, the announcement that said so little but meant so much: "Helphire Group has been advised by one of its significant referrers that it expects to end referrals to the company within the next few months.” The client was AA/Saga, whose new private equity owner was looking to cut its costs.

Tech crunch: 14 September 2009, trading statement

Helphire was hugely reliant on the AA contract: it emerged that 22% of case hire volume came from there, as well as 11% of revenue. The trading statement also showed what a disaster the implementation of Expedite, an expensive IT system Helphire had been developing for five years, had been. Management decided to stick with the existing system, writing down £12m and making another 55 people redundant as a result.

The big loss: 2 October 2009, full-year results

The extent of Helphire’s traumas was finally revealed: a pre-tax loss of £149m and more than 700 people had lost their jobs. However, the restructuring plan was working, with net debt down to £239.5m and the time to collect cash from debtors down to 223 days from 257. The amount of time cars were actually on the road being used, rather than sitting idle, was up to 81.8%, suggesting that the company was at least becoming more efficient.

A false dawn? 30 July 2010, pre-close trading update

In February, group managing director Martin Ward praised the “maturity and work of staff” in what was the middle of a quiet patch when the business was clearly recovering. Car hire lengths, for example, were increasing. By July, management was confident enough to suggest that Helphire was becoming “a smaller and more profitable business”. However, there was a warning that a period of dry weather was leading to fewer accidents, while petrol prices remained high.

Problems return: 27 October 2010, trading update

This warning should have been given greater prominence. As it turned out, management had to warn yet again that profit would be below market expectations, this time just weeks after improved full-year results. Fuel prices and low accident rates were blamed. Nearly one-third was slashed off the share price, now just 21.5p.

The big error: 6 May 2011, management statement

A radically remodelled management from 2007 had, at the very least, appeared open about the company's financial ills and restructuring was essentially complete. But the killer detail still hadn’t yet emerged and, when it did, the share price collapsed to less than 5p. Yet another profit warning, but this time from the realisation that an accounting error had led to an overstatement of the amount of money owed by insurance companies. The total was expected to be around £25m, just 15% of the amount Helphire thought it was owed.

Deloitte made the fall guy: 15 July 2011, auditor change

KPMG was hired to investigate the shortfall, which in fact turned out to be £27m. Parts of the business faced writedowns and KPMG replaced Deloitte as the business’s auditor, at least in the short-term. Finance director Ian Wardle was also replaced. Rose lamented: “That this error arose is a matter of huge disappointment to the board, who have been working for more than two years to deliver change and stabilise the business.”

Mark Leftly is deputy business editor at The Independent on Sunday.