A filing on Companies House shows that Blackmore Bond has again exploited the accounting-period-shortening trick to extend the date that its accounts are due.

Blackmore Bond plc should have filed its December 2018 accounts by June 2019, but used the one-day-shortening loophole to legally delay filing accounts for three months. That three months expired on Friday 27th and on the very same day, right in the nick of time, Blackmore Bond electronically submitted a further adjustment.

Blackmore cites the resignation of its auditor, Grant Thornton, as the reason for its failure to file accounts in a timely fashion.

Blackmore has come under heavy scrutiny since the collapse of London Capital and Finance, with more attention paid to relatively small payments of quarterly interest (relative to the amount Blackmore has taken in) than any other investment company I can think of.

Immediately after London Capital and Finance was shut down by the FCA, Blackmore replaced LCF at the top of Surge’s Top Isa Rates and Best Interest Rates websites. Given the level of undesired publicity it has received as a result, this marketing strategy has arguably backfired.

Blackmore has now stopped accepting investment from UK investors and, almost uniquely for a UK-based investment company, only accepts investment from outside the UK, via its Blackmore International website.

Blackmore Bonds, which issues unregulated loan notes in its property development business, is a few days late in paying quarterly interest to some investors, according to reports in Money Marketing and the Telegraph.

According to Bond Review readers and The Telegraph, Blackmore’s switchboard is jammed with worried investors and it is not answering emails.

A Blackmore spokesman told The Telegraph:

Due to delays in the banking system, a number of client interest coupons may not yet have been processed. We are working hard to resolve the issue and are confident it will be resolved imminently.

Normally a company being a few days late in paying interest would be no big deal.

Especially when you consider that in March, Blackmore stated that it was obtaining Return on Capital Employed of 54% and that this was sufficient to meet the high rates of return required to return up to 9.9% to investors while paying commission of up to 20%.

But the collapse of London Capital & Finance in February, and the fact that Blackmore used the same marketing agent as LCF (and paid it up to 20% commission), appears to have spooked some investors and caused them to keep a close eye on their regular payments.

This is borne out by Blackmore’s Trustpilot reviews, which over the last 48 hours have seen a spate of 1-star reviews from worried investors.

Didn’t receive coupon last day of month 31/7 and couldn’t get through. They also appear to have delayed filing the annual accounts. All alarming and concerned end up like LCF scam.

Unfortunately lack of communication breeds mistrust and it is quite understandable that investors are worried due to the collapse of London Capital and Finance, a similar venture.

As per previous posts i am also getting quite worried regarding my investments with Blackmore..I am now preparing for worst case scenario..??

This will be of great concern to Blackmore which prominently advertises a 5-star Trustpilot logo on the front page of its website. At time of writing this is no longer accurate as Trustpilot shows its average rating has dropped to 4 stars.

Blackmore Bonds closed to new business from UK investors in April, but continues to invite overseas investors to invest via blackmoreinternational.com. Obtaining information about its bonds via the blackmoreinternational.com requires prospective investors to declare that they are not from the UK.

To boost its attempts to secure investment from outside the UK, Blackmore opened an office in Dubai this year, with further offices planned in Tokyo and Hong Kong.

Last month Blackmore Bonds used a loophole in the Companies Act to delay filing accounts. Blackmore Bonds says it will file accounts next month in September, after changing its auditor.

Blackmore’s Trustpilot page currently states that it has raised £35 million from investors in its bonds.

Update 7.8.19

According to Money Marketing, Blackmore has now made the late interest payment, describing the delay as a “clerical error” with their bulk payment system.

A few days before it fell overdue with its annual accounts, Blackmore Bonds plc has used a loophole in the Companies Act to delay filing.

Blackmore Bond plc’s accounts for the year ending December 2018 would normally have become overdue on 30 June 2019. On 27 June Blackmore shortened its accounting period by a single day, giving it another three months before it legally becomes overdue.

Scrutiny has fallen on Blackmore Bond plc as a result of the collapse of London Capital and Finance. Like LCF, Blackmore used Surge Financial as a marketing agent. Immediately after LCF collapsed, Blackmore bonds were promoted in LCF’s place on Surge’s top-isa-rates and best-interest-rates websites. Blackmore recently disclosed that it pays up to 20% of investors’ money as commission. Unlike LCF, Blackmore continues to trade and make all due payments in full, to the best of our knowledge.

Blackmore Bond plc’s last accounts for December 2017 (now a year and a half old) disclosed that it had raised £25 million from investors. At that time it had net assets of minus £7.6 million.

The accounts said that the company “fully intends to reach the £100m fund raising mark”.

Blackmore closed to new business in April 2019. In May 2019 it opened an office in Dubai to promote its bonds abroad. At time of writing its website still says that it is not currently taking new investment.

Why it is unable to file its annual accounts in a timely fashion is not known.

Update

Blackmore has told IFA trade paper Money Marketing that the accounts will be filed in September 2019, following a change of auditor. Blackmore’s last accounts were audited by Grant Thornton.

Blackmore states that it expects revenue of £20 million this year. As to whether it is generating sufficient profit to pay all investors back, we will have to wait and see.

While it was still open to new business, Blackmore paid commissions of 20% to Surge Financial (disclosed via its website and its last accounts). In slightly simplified terms, Blackmore needs to generate returns of 15.6% per year after costs and overheads to repay investors who invested in 3 year loan notes paying 7.9% per year, due to the 20% commission that comes out at the start.

Blackmore Bonds has removed all literature relating to its bonds from its website and replaced them with the following notice:

We have achieved our fundraising goals for this tax year and are not currently taking new investment.

We will be introducing our next offering in the following tax year, so please watch this space for future announcements.

If you are a current investor, you can log in below to manage your account.

At time of writing the rest of the website consists of pictures of six Blackmore property developments and an invitation for residential developers and landowners to contact Blackmore to build partnerships.

After the collapse of London Capital & Finance in December 2018, LCF’s marketing agent, Surge, switched to promoting Blackmore via its top-isa-rates.co.uk and best-interest-rates.co.uk websites. This led to a brief resurgence in web traffic to Blackmore, with its Alexa ranking climbing from sub-1-million to a peak of 500,000 in February 2019.

In February 2019 Surge’s websites stopped promoting Blackmore, and traffic to Blackmore Bonds’ website has declined sharply since, currently sitting at an Alexa rank of 600,000 and falling.

At time of writing, best-interest-rates.co.uk shows a blank page, while top-isa-rates.co.uk promotes a range of peer-to-peer and IFISA investments, with Capital Bridge as their “top pick”. The table no longer misleadingly compares these investments with cash ISAs, instead listing capital-at-risk IFISAs only.

If Blackmore’s offering in the new tax year is materially different from its last one, we’ll bring you an update at that time.

Blackmore Bonds has been making a number of changes to its website recently to improve its compliance with the FCA’s “clear, fair and not misleading” rules.

Around a year ago, the top of Blackmore’s website prominently featured the headings “Capital Protection” and “Income Certainty” below its interest rates. Immediately below this, in letters half the size, were the words “Capital at risk | Please read our risk section. Illiquid and non-transferable. Not FSCS”.

By including risk warnings in text half the size of headlines saying “Capital Protection”, this old version of the website put Blackmore potentially afoul of the FCA’s regulations that “balancing statements” such as these must be displayed with equal prominence to be clear, fair and not misleading.

Blackmore’s new version of its website is a considerable improvement in this regard, with the “Capital Protection” and “Income Certainty” headings gone, and a risk warning “The products on this site offer a high return on your investment, it is important to understand that as with all investments of this type your Capital is at Risk” displayed in 27-point font, the same size as its headlines.

The FCA-regulated firm responsible for approving Blackmore’s website has recently changed from NCM Fund Services to Northern Provident Investments.

One of the most notable changes is that Blackmore’s website now includes the following text prominently at the top: “Up to twenty percent of your money will go towards paying for the cost of raising capital & the overheads of Blackmore & adds to the risk of capital not being returned.”

For Blackmore to disclose the extremely high commissions paid to its introducers out of investors’ money is a refreshing change. Indeed, its own website stated as at March 2018 “Blackmore Plc [sic] does not have any set-up charges or management fees“. How this earlier statement can be reconciled with the new disclosure of up to 20% of your money being paid out in commission is not clear to me.

That Blackmore Bond paid out up to 20% in commission is already known from Blackmore’s December 2017 accounts, which disclosed that £25.4m had been raised in the period (covering July 2016 to December 2017) and that £5.1m had been paid to Surge Financial for “sourcing investors loans and front and back office operations” – almost exactly 20%.

However it is a safe bet that not many investors will have read the accounts on Companies House, and this is the first time Blackmore has disclosed the upfront commissions it pays on its website. Indeed, it is one of the few companies offering unregulated bonds than does so. Which is refreshing, if slightly depressing that Blackmore is the only company with this level of commitment to transparency.

Effect on risk

As Blackmore’s notice says, the fact that up to 20% of investors’ money is paid out to Surge or other parties “adds to the risk of capital not being returned”.

Indeed, the commissions paid to Surge by London Capital & Finance were recently identified as a contributor to the company’s insolvency by LCF’s administrators.

It should be emphasised that unlike London Capital & Finance, there are no reasons to doubt Blackmore’s current solvency. It showed net liabilities of £7 million on assets of £18 million in its last accounts of December 2017, but that was a year ago and the position could have changed significantly. To my knowledge Blackmore continues to make all its interest payments on time.

That balancing statement comes with the caveat that Blackmore Bonds plc was incorporated in July 2016 and its bonds have a minimum term of 3 years, so its first capital repayments will not fall due until the second half of this year.

Blackmore has nothing to do with London Capital & Finance other than sharing the same marketing agent and call centre provider, but it is subject to the same laws of mathematics that mean that – as it says – the higher the commissions it pays out, the higher the risk of capital not being returned.

In slightly simplified terms, if Blackmore raises £10,000 from an investor in its 3 year bonds paying 7.9% per year, and pays out 20% in commission, it now needs to turn £8,000 into £12,370 to repay the investor in full, representing a 55% return over 3 years – or 15.6% per year.

For its 5 year bonds paying 9.9%, the return required to turn £8,000 into £14,950 is 87% over 5 years, or 13.3% a year.

Any investment targeting a return of 15.6% or 13.3% a year will inevitably be extremely high risk – and while Blackmore can diversify over many such projects, some of its projects will fail, which will lower the overall return.

Blackmore’s website states that it pays up to 20%. However, as its last accounts disclosed that it raised £25m and paid Surge £5m, it seems fair to assume the maximum  commission payable in the above calculation.

Despite Blackmore’s commendable new-found appetite for transparency and risk disclosure, I have to say I’m still not getting a sense of the very high risk of its projects not delivering returns of 13%+ per year from its website.

Risk of “investor appetite” waning

There is one last new risk warning on Blackmore’s website to comment on. Under the “Risks” page, one section states:

Failure of bond marketing

There can be no guarantee of investor appetite for the Bonds to the extent predicted by the Company or, indeed, at all. In such circumstances investors may lose some or all of their investment.

How a decrease in investor appetite (i.e. new investment) could lead to existing investors losing some or all of their investment sorely needs clarification.