Snigger

Ullmann, 55, announced in 2017 that all executive pay would be capped at £400,000 — 20 times that of the lowest-paid worker — and that the group would cap dividends to its family owners at £3m a year.

Ullmann, a father of four, said in 2018 that “capitalism isn’t working any more”. “I had an epiphany and realised business can’t all be about profit. It has to be about creating an environment where people thrive,” he said.

Hey, cool or what?

One of Britain’s biggest recruitment agencies is racing to raise new investment after the family-owned business came close to collapse because of a clash with its lenders.

Cordant Group, which finds jobs for 125,000 people a year at more than 5,000 clients, including Amazon and Tesco, is rushing to secure a deal with new investors — a move that would end the majority-ownership of the Ullmann family.

Go woke, go broke.

Or, as we might put it, that’ll be what then.

23 thoughts on “Snigger”

  1. Umm, why cap salaries at £400,000 but dividends at £3m? What’s good for the goose is good for the gander.

    Sounds like it was just a ruse to cap executive salaries.

  2. Why would a business whose capital assets probably don’t extend much past the teaspoons in the staff tearoom need to borrow capital?* And who would lend it to them?

    *: A bunch of overpriced acquisitions of equally capital-light competitors perchance?

  3. I’d ask the same question as BiG. Why’s the company borrowing capital? The right place to raise money’s equity. Then the investors share the risk. Apart from their reluctance to share the profits, of course. What you get by being greedy.

  4. “Umm, why cap salaries at £400,000 but dividends at £3m? What’s good for the goose is good for the gander.”

    According to Companies House, there are 3 Ullmann family members who each own between 25 and 50% of the shares. So 3 people, each owning about a third of the shares and getting £1m or thereabouts. You can see why the paid employees might be a bit hacked off at having their wages capped at £400k.

  5. Ullmann, a father of four, said in 2018 that “capitalism isn’t working any more”. “I had an epiphany and realised business can’t all be about profit. It has to be about creating an environment where people thrive,” he said.

    Odd that, having had this revelation, he did not convert the business into a partnership.

  6. “Ullmann, a father of four, said in 2018 that “capitalism isn’t working any more”. “I had an epiphany and realised business can’t all be about profit. It has to be about creating an environment where people thrive,” he said.”

    Jesus. At 57 you become an idiot?

    Why did Microsoft Windows beat IBM OS/2? Why did Bill Gates become the richest man on earth? Because Microsoft was an environment where people thrived and IBM was a bureaucracy. Microsoft had people building stuff all day, pushing at what they could do, while IBM had people dressed in suits, sitting in pointless meetings, filling out timesheets, filling out requisitions for simple things, and getting rewarded for how many lines of code they wrote (the equivalent of a composer being paid for how many notes were on a score).

    And Microsoft made a lot of people into multimillionaires. Gabe Newell took his millions and set up Valve. So, you got Half-Life and Steam. Joel Spolsky took his and set up Fog Creek, and you got Stack Overflow and Trello.

  7. BiG

    “Why would a business whose capital assets probably don’t extend much past the teaspoons in the staff tearoom need to borrow capital?* And who would lend it to them?”

    It’s recruitment (and contracting) – hence invoice discounting (CID), which is pretty normal in that business. Basically debt secured specifically on trade debtors. Once done, that can often make the operating balance sheet cash positive (after CID) because of creditors (trade and HMRC). It’s the kind of model that can make recruitment (temps) quite low cost to enter.

    It looks here as if it was a case that one of the CID lenders wanted out (if I had to take a punt, RBS?), and needed to be replaced. But not helped by the fact that profits have headed south. Because the sector is easy to get into (little equity required if using CID), it can be horribly competitive with regard to margin %, whilst all the time the internet continually changes the underlying business model.

  8. Dennis, Bullshit Detector

    Any company lead by an individual whose preferred title is “Chief Energizer” is one to be avoided at all costs.

  9. Dennis, Offender of Germans

    According to Companies House, there are 3 Ullmann family members who each own between 25 and 50% of the shares. So 3 people, each owning about a third of the shares and getting £1m or thereabouts. You can see why the paid employees might be a bit hacked off at having their wages capped at £400k.

    “The louder he talked of his honor, the faster we counted our spoons.”

  10. PF,

    Sure, I grok that you can secure debt against vague promises. Question is, why would you do something that risky? The fact that the management of a pure services company gets the company into long-term borrowing is indicative of serious management failures.

    It’s not hard to keep a pure service company solvent, you just need to do good and conservative cashflow forecasting and keep your “tide over” money, call it a few months’ operating costs, in the bank, not paid out to shareholders. And definitely you don’t borrow money long term to pay out to shareholders then secure that borrowing against future income. At least, not if you want your otherwise viable business to go under the minute one of the lenders (therefore all of them) demand immediate repayment.

  11. Dennis, Who's Got Him A Shootin' Iron

    Question is, why would you do something that risky? The fact that the management of a pure services company gets the company into long-term borrowing is indicative of serious management failures.

    Given that senior management is calling itself the “chief energizer” and is publicly spouting about how turning a profit is in such bad taste, why wouldn’t you assume the company is in the hands of morons? Ullmann didn’t earn his position, he inherited it. Think about how well that arrangement’s worked out for the royal family and then apply it to a family owned business.

    Cap salaries – for any reason – and your top performers will migrate to your competition.
    Borrow shit-loads of money you can’t repay and lenders will balk at lending you more… especially when you’re running around telling anyone who will listen that you don’t give a flying handshake about making money.

    My guess is this: Cordant’s lenders have come to the conclusion Ullmann is both greedy and stupid and have decided to manufacture a crisis to get him out of management and get the family to agree to terms that will ensure they don’t bleed the company dry.

  12. BiG

    Sure, I grok that you can secure debt against vague promises.

    An invoice issued by the company is hardly a “vague” promise. It’s the result of a binding contract, service delivered and that would easily stand up in court.

    Also: The money that the client pays to the company to settle the invoice goes into a trust account at the bank (not the company’s bank account), ie it’s paying down the debt raised on that specific invoice, so there is little risk to the bank there.

    CID lenders “typically” advance (up front when the company issues the invoice) no more than 80%-90% tops of the invoices being raised say on any particular day (#), so that there is protection in the one area where there is risk, which is insolvency and clients try “not paying” (they might chance their arm and say the service wasn’t delivered or whatever?).

    The rest of the time, the CID lender makes a nice relatively safe interest margin from the transaction. And the company makes a significantly higher return on equity. If both CID lenders and companies didn’t consider it a win-win, then obviously it wouldn’t happen.

    (# Including VAT – yep, when you cut to the chase, that’s the creditor most at risk if occasionally such a company goes tits up, HMRC, not the CID lender.)

    Question is, why would you do something that risky? The fact that the management of a pure services company gets the company into long-term borrowing is indicative of serious management failures.

    For the bank – no, not at all. it’s short term lending (60 to 90 days or so max) against the value of a specific invoice (often insured by the company as well for good measure!).

    For the company – CID is often an integral part of the recruitment model at that size; large organisations / groups might prefer central treasury functions / loans etc instead. It significantly reduces the equity needed to fund operating capital. Which takes us to:

    It’s not hard to keep a pure service company solvent, you just need to do good and conservative cashflow forecasting and keep your “tide over” money, call it a few months’ operating costs, in the bank, not paid out to shareholders. And definitely you don’t borrow money long term to pay out to shareholders then secure that borrowing against future income. At least, not if you want your otherwise viable business to go under the minute one of the lenders (therefore all of them) demand immediate repayment.

    Sure, but what any successful business does is try to maximise IRR / return in the context of the risk being taken. If the return on equity is otherwise poor, that’s potentially a crap return for the investor (and hence not worth doing compared to the competition). Ie, the optimum model / leverage can be “priced in”, wrt its effect on margin %s etc?

    More relevantly, it might appear that there are separate issues with this company:

    A CID lender wanted out. Happens a lot. This wasn’t even immediate, it was nothing more than “at the end of the term”, in theory it should have been planned for in advance, they knew what the end date was. The company ordinarily should have been testing the (CID) market in any case up to that end date.

    In addition, the company perhaps (operationally) wasn’t being run well – it was making a loss. Nothing in itself to do with CID. Some aspects of recruitment are relatively simple. Amongst other things, control the overhead % in the context of the margin / Net Fee Income %. It means being brutal with overhead whenever NFI levels start to fall (whether due to sales or margin %). Recruitment companies that can’t get that right have a higher risk of failure, and especially (as you rightly point out, and as for any other company) when leveraged. This one started making a loss, a problem, unless it was planned for: ie it was short term P&L “investment”, and the cashflow forecast / existing P&L reserves adequately covered it.

    Obviously, separate from “profit”: manage cash / the forecast, as you say. But that’s true of every company (with or without debt). Leverage is part of any business model and hence is not the problem in itself here – unless you are arguing against companies ever taking out any sort of debt?

  13. @BoM4

    Argh, MS vs IBM – like VCRs the worst tech won due to superiority complex of big firms

    IBM OS/2 (and PS/2) was years ahead of MS Windows 3 (and PC clone makers}

    I’d add that MS were evil and stole other firms – from PC-Dos onwards – IP and products, put it in their MS OS then bankrupted most competitors in legal suits

  14. @PF… Can’t say that I share your enthusiasm for CID… From experience, a company that starts factoring its invoices is a company that’s on its way to going bust.

  15. Snigger – Some Weekend Humour

    The game has changed and we have Trump to thank
    https://www.youtube.com/watch?v=0Z1uD4OXZLs

    Toby Young – Proud to be a Deplorable
    Journalist Toby Young talks about being publicly shamed in 2018 and why he’s setting up the Free Speech Union. Why don’t you join? https://freespeechunion.org
    https://www.youtube.com/watch?v=ioUAJUbhd4c

    Offence archaeologists – that’s pure gold
    James O’Brien: sanctimonious pompous twat – Yep

    Toby would be a great Question Time panellist

    Gigs every month at London’s free-thinking comedy club https://comedyunleashed.co.uk/whatson

    Oh dear…

    The One Where They All Returned: HBO Max to air ‘Friends’ reunion special
    https://www.youtube.com/watch?v=m2DkH-v6pqM

    …a talk show, not an Episode

  16. Pcar,

    The best technology won in both cases. But you have to look away from one narrow criteria.

    VHS won the VCR battle because they got the first machines that could do 2, and then 4, hour recording times. Betamax looked better, but you weren’t going to be able to record Stagecoach off the TV on a 60 minute Betamax tape. That’s what gave VHS traction.

    Windows beat OS/2 (and Macs) because Microsoft were really good at looking after software developers. They did a lot to help developers to build software, while companies like IBM and Apple saw developers as a money maker. Companies ported their CP/M software over to Windows as it was less of a struggle. Peripheral manufacturers wrote drivers for Windows rather than OS/2. People bought Windows because they could get products like Ashton Tate Dbase and more printers.

  17. Baron

    “@PF… Can’t say that I share your enthusiasm for CID… From experience, a company that starts factoring its invoices is a company that’s on its way to going bust.”

    Not really enthusiasm, just what I see?

    FWIW I understand the sentiment (might previously have said the same), but the reality is that it is routinely used in recruitment by successful companies. In effect, little more than a form of secured debt, the same that lots of companies do when they consider optimum risk / return wrt % equity versus debt to fund the balance sheet.

  18. @BoM4
    +1
    IBM management hated PCs because they conflicted with their business model. They could have afforded to give away mainframe hardware – the real money came in through payments for software and maintenance. But once a manufacturer has sold a PC, they’re unlikely to get any more money from it. OS/2 was an attempt to introduce the mainframe model into the PC. It was sold by IBM salesmen into existing accounts, but got little traction elsewhere. And then M$ came out with NT and destroyed OS/2’s USP.

  19. “…Ullmann, 55, announced in 2017 that all executive pay would be capped at £400,000 — 20 times that of the lowest-paid worker — and that the group would cap dividends to its family owners at £3m a year. Ullmann, a father of four, said in 2018 that “capitalism isn’t working any more”. “I had an epiphany and realised business can’t all be about profit….”

    Hmm. I rather suspect that it IS about profit. If we now know that the Group is in financial difficulties, the Group owners must have known that for some time before. And they will have been looking to save costs.

    Strikes me that spouting fake lefty environmental rubbish is a good way of diverting attention from the fact that you are cutting wages….

  20. @BoM4

    Wasn’t referring to Betamax; V2000 had 4 hour per side tapes (ie 8 hour) long before VHS single side 4 hour tapes. Plus, V2000 still and fast-forward/rewind was stable, not a jittery 1/2 frame mess

    Grundig & Philips wouldn’t licence V2000 to other manufacturers – failure

    OS/2’s failure was similarly due to licencing and marketing failures

    Ashton Tate dBase was Dos and worked on OS/2, but IBM wanted a closed shop, bought Lotus and tried to sell PS/2, OS/2 & Smartsuite bundles

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