Wellesley Finance £9 million in the red, material doubt over going concern status

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Wellesley Finance has filed accounts for the year ending December 2018.

The company made a £10.2 million loss in 2018, and at the end of the year, its balance sheet stood at minus £9.2 million in net liabilities. Despite the loss, the directors say they are “satisfied with the overall direction of the business and are hopeful for its future performance”.

Wellesley says it has adjusted its lending strategy to focus on more established borrowers, a strategy which it says has resulted in no losses so far, and the directors “forecast a return to profitability in the near term”. Unaudited accounts suggest that company earnings were slightly positive in 2019, according to the directors.

Nonetheless Wellesley’s auditors have drawn attention to its net loss and net liabilities, and stated that “there is a material uncertainty that the company that may cast significant doubt over the company’s ability to continue as a going concern”. This is standard accountant-speak for “it might go bust but then again it might not”.

In particular, both the directors and auditors make clear that, as part of the new strategy, Wellesley is reliant on a smaller number of larger developers, which creates the risk that Wellesley runs into trouble if one of them doesn’t pay back as expected.

Almost £19 million is owed to Wellesley Finance plc by related companies. Wellesley’s ultimate parent is IFX Group Trust, which is based in the Isle of Man.

As at December 2018 Wellesley had raised a total of £137 million via its fixed term bonds, including £98 million in unlisted minibonds. It currently raises funds through listed bonds on Euronext.

Since 2014 Wellesley has raised money by advertising directly to the public, e.g. via TV adverts. While its current literature is difficult to fault in terms of making clear that capital is at risk, it previously used practices that the FCA has now made clear is misleading, in particular comparing the rates on its capital-at-risk unregulated bonds to cash accounts.

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3 thoughts on “Wellesley Finance £9 million in the red, material doubt over going concern status

  1. Brev,

    When you review other companies and where they may be based or their subsidiaries…you normally cast a number of assertions to scare the readers of your blog!

    “IFX Group Trust, which is based in the Isle of Man – with this comment above you merely glance over it.

    And where is that disclaimer you normally ad to say thay as with any loan note, you could lose all of your money?

    This is not in keeping with your normal review writing.

    Any reason behind this?

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