Group First files accounts as Store First winding up showdown looms – provision for Park First repayments balloons to £111m

Link: All our Store First and Park First articles

Group First, the parent company of the Store First and Park First investment opportunities, has recently filed its accounts for the year ending June 2018, as have its subsidiaries.

Last year Group First posted a net loss of £43.9m and net liabilities of £32.4m. By far the most significant contributor to its £32.4m worth of red ink was a £62 million provision for making repayments to investors in Park First.

Park First in its original form, which offered investors a “guaranteed yield” of 8% in the first two years, rising to “projected yields” of 10% and 12% in the following four years, was deemed to be an illegal unauthorised collective investment scheme by the FCA in December 2017.

Investors who had already handed over money were given two options: switch to a new “lifetime leaseback” scheme in which they would receive only 2% a year plus variable dividends, or hand back their parking space and get their money back, minus any yield already received.

The provision for repaying Park First investors has now increased from £62 million to £111 million.

Despite this, Group First’s net liabilities has remained almost unchanged, increasing by only £11,475 and remaining £32.4 million.

Amongst many minor shifts in Group First’s various other assets and liabilities, there are two increases in assets which stand out, to balance the £49 million increase in the Park First provision. The first is £27.3 million which has appeared on the balance sheet (nil in 2017). The second is a £30.6 million increase in “Investment properties”.

Goodwill

The £27.3 million of new goodwill represents, according to the accounts,

the excess of the cost of acquisition of a business over the fair value of net assets acquired. It is initially recognised as an asset at cost and is subsequently measured at cost less accumulated amortisation and accumulated impairment losses. Goodwill is considered to have a finite useful life and is amortised on a systematic basis over its expected life, which is 10 years.

Translation for non-accountants: when you buy a business, you put the sum of its parts (its buildings, machinery, etc) on the balance sheet in the usual places, and the rest of the price you paid to buy the business (because businesses are usually worth more than the sum of their parts) goes down as “Goodwill”.

So which businesses has Group First acquired? This can be found by looking at the list of subsidiaries and comparing with the same list from last year. The following subsidiaries have been acquired since the 2017 accounts were filed:

  • Store First St Helens Limited
  • Harley Scott Holdings Limited
  • Store First Midlands Limited
  • Park First Glasgow Limited
  • Store First Blackburn Limited

Three other subsidiaries, Park First Glasgow Rentals Limited, Park First Gatwick Rentals Limited, and Park First Freeholds Limited, were incorporated directly under Group First Global’s ownership rather than acquired.

The five acquired businesses reported net liabilities of £30.3 million in their June 2018 accounts. Due to their small size they did not file profit and loss accounts. £19.3 million of this deficit comes from Park First Glasgow’s share of the provision for repaying Park First investors. The Goodwill line essentially balances out bringing these liabilities under the Group First Global Limited umbrella.

Harley Scott Holdings was a business run by Toby Whittaker before the advent of Store First and Group First.

In 2011 a subsidiary of Harley Scott Holdings (which was formerly named Dylan Harvey Land Investments) was investigated by the FSA (the predecessor of the FCA) over concerns it may have been operating a collective investment scheme. This investigation appears to have come to nothing.

Another Dylan Harvey business, Dylan Harvey Residential, collapsed in 2009 after taking around £6.5 million in deposits from investors in off-plan property.

Some of Group First’s subsidiaries were previously Harley Scott subsidiaries, and have been repurposed as Store First or Park First subsidiaries even before the 2017 takeover. For example, Store First Midlands Limited was Harley Scott Commercial Limited until 2014, and prior to that Dylan Harvey Commercial Limited until 2010. Park First Glasgow was previously Harley Scott Residential Limited.

Investment properties

Group First Global’s “Investment properties” line increased from £13.4m in June 2017 to £44.1 million in 2018, according to the group balance sheet.

However, note 14, which expands on this line, says that the group’s property at fair value on 1 July 2017 was £31.6 million, not £13.4 million.

Added to this was £1.1 million of property acquired externally, and an £11.3 million uplift to the value of existing property, giving the final value of £44.1 million on the balance sheet.

But the contradiction over the value of the investment property at the start of the year – £13.4 million on 30 June 2017 according to the balance sheet and £31.6 million on 1 July 2017 according to note 14 – calls this into question.

Group First’s net liabilities position will be of crucial interest to Park First investors who opted for the buyback option. Park First gave itself 12 months to repay – after the title for the parking spaces is transferred back to them. Investors have reported that legal delays prevented them from starting the 12 month clock ticking. Nonetheless, with the original illegal collective investment scheme shut down 16 months ago, these deadlines must now be imminent for most investors.

The deadlines are of course irrelevant if Park First’s significant net liabilities indicate it no longer has the money to repay them.

Profits, going concern and dividends

Group First’s turnover has collapsed compared to 2017, with a 91% decrease in turnover from £167 million in 2017 to only £15 million in 2018.

The overall group made a £238k profit, according to the profit and loss account, a marked improvement from a £43.9 million loss in 2017.

However, this profit includes £11.3 million from revaluing the investment properties, over which Group First’s figures seem to contradict each other.

The accounts state that the company is expected to continue as a going concern.

As in 2017, a dividend of £250,000 was paid to Group First Global’s sole director, Toby Whittaker.

Winding up hearing

Store First Limited and four other Store First companies are due to face a winding up hearing on Monday 15 April.

Investors in Store First pods and Park First spaces have been targeted over recent months by a number of scams which offer to pay them outlandish sums for their storage pod or car park space (e.g. around 1.4x what they paid for it). Among the names they have used are GRL and Herschel Escrow.

Investors who contact them will be told they have to pay legal fees or other spurious fees, which they will never see again. (If someone actually wanted to buy their storage pod / parking space, they would deduct their costs from the amount they paid the investor.)

Court date finally set for Government’s Store First winding up petition

A court date has finally been set for the Government’s winding up petition against Store First and related companies.

The winding up petition was originally announced back in July 2017, but was then adjourned. The trial is now due to take place on 15 April 2019 (almost two years after the original announcement) at the Manchester District Registry of the High Court.

The Government is inviting Store First investors to contact them with information about their investment experience.

If you have information you would like to submit to the Insolvency Service in relation to your investment experience with Store First and related companies, please send your comments to storefirstpetition@dwf.law.

In Store First’s last accounts (June 2017), Store First director Toby Whittaker said “the directors were surprised to have the winding up petition issued having been fully co-operative with the Secretary of State’s requests” and “The company has instructed solicitors and intends to defend this vigorously”.

Group First, Store First’s holding company, has put in place a provision of just over £2 million to cover the cost of defending the winding up petitions, according to their last accounts.

Store First claimed in May 2018 that returns from its storage pods “continue to rise”.

Store First and Park First accounts filed: £42m net loss, £31m net liabilities, £62m provision made for repaying Park First investors

The Group First group of companies, comprising the unregulated store pod investment scheme Store First and the unregulated car park space investment scheme Park First, has just filed the group’s accounts for the period ending June 2017.

Some selected highlights of the accounts follow. Anyone seeking a full picture of the companies’ accounts should consult the originals on Companies House, where they can be downloaded for free.

Group First Global Ltd, the holding company (note: the following are the results for the group, rather than the individual Group First Global Ltd company)

  • Total turnover was £163m. Cost of sales was £185m, meaning that the group was making a gross loss of £22m before we even get to overheads. After overheads (administrative expenses), the group made a loss of £44m, with the final loss after tax and interest being £42m.
  • toby whittaker
    Toby Whittaker, Managing Director and 100% owner of Group First Global Ltd

    Despite Group First’s heavy losses, ordinary dividends of £250,000 were paid. These would have been paid to Group First Global Limited’s sole shareholder, which is Toby Whittaker. Note that there is nothing illegal about this because Group First Global as a company had retained earnings from previous years, even though the group as a whole had negative earnings.

  • In 2017, Park First was ordered by the FCA to stop promoting a collective investment scheme without authorisation, and instead allowed to restructure its investment offering as a “lifetime leaseback” scheme. Investors have two options: either continue in the lifetime leaseback scheme, which means that instead of receiving a “guaranteed” 8% per annum return as originally promised, they receive 2%pa plus variable dividends depending on profitability. (Park First was, and remains, heavily loss-making – see below.) Or receive their money back, minus any returns already paid to them, after at least a year.
  • Group First Global has made a provision of £62 million in its accounts for making repayments to investors under both these options.
  • After allowing for this provision, Group First is £31 million in the red (net liabilities). They would have had net assets of £29 million had this provision not been needed.
  • The Government has lodged a petition to wind up the Store First companies. Group First intends to defend this petition, and has put in place a provision of £2 million to cover the cost of doing so.
  • Group First’s previous auditors, Pierce C.A. Limited, resigned in September 2017. The latest accounts are audited by the new auditors, Lopian Gross Barnett & Co.

Park First Limited

  • Total turnover in the period was £18m. Cost of sales was £41m, meaning that the company was making a loss before we even get to overheads. The final loss after overheads, interest and tax was £30 million.
  • Net liabilities were £30.2 million.
  • With Park First failing to even cover the gross cost of its services, even before overheads are taken into account, it is clear that a significant turnaround will be needed before there is a prospect of dividends for investors who opt for the lifetime leaseback option.

Store First Limited

  • Store First Limited made a gross profit of £1.1 million on turnover of £4.0 million. After overheads, however, it made a £7.1 million net loss.
  • Net liabilities were £14 million, consisting of £466k debtors (mostly trade debtors and amounts owed by other Group First companies), minus £12.2m creditors (mostly amounts owed to other Group First companies) and a £2m provision for liabilities.
  • In regard to the winding up petition, the directors state “On the 1 August 2017 a hearing was scheduled in High Court by the Insolvency Service calling for a petition to wind up Store First Limited. The result of this hearing led to an adjournment. Subsequently it remains uncertain whether Store First will remain trading or enter into insolvency proceedings. The outcome of this is likely to be reached after a period of 12 months and while this casts significant doubt on the entity’s ability to continue as a going concern in the long term future, it does not cast significant doubt on the entity’s ability to continue trading for the forseeable future.”

Group First has a number of other subsidiaries, which I will summarise very quickly below as they were exempt from filing full accounts under the small companies regime, so little meaningful information is available. “No P&L” indicates the company did not file a profit and loss statement.

  • The following subsidiaries were all listed as dormant: Residential First Ltd, Select Escapes Ltd, B1 Workspace Ltd, Group First International Sbn Bhd (registered in Malaysia), Store First Singapore Branch and Park First Singapore Branch (both registered in Singapore).
  • Simonstone Parking Limited – no P&L, net assets £53k
  • Park First Skyport Limited – no P&L, net assets minus £21.5 million
  • Store First St Helens Ltd – no P&L, net assets £450k
  • Equestrian First Ltd – no P&L, net assets £6.7 million
  • Ground Rental Ltd – no P&L, net assets minus £27k
  • SFM Services Ltd (formerly Store First Management Limited) – £19k profit, £765 net assets
  • Business First Ltd – no P&L, net assets minus £1.4 million
  • Park First Management Ltd – no P&L, net assets £9k
  • Help Me Park Gatwick Ltd – no P&L, net assets minus £16 million
  • Cophall Parking Gatwick Ltd – no P&L, net assets minus £16 million
  • Help-Me-Park.com Ltd – no P&L, net assets £506k
  • London Luton Airport Parking Ltd – no P&L, net assets £11 million


Conclusion

Park First investors who opt for the new “leaseback” scheme paying 2% and variable dividends will clearly have to hope for a remarkable turnaround in Park First Limited’s profitability, given that as at the date of its last accounts it doesn’t even cover the cost price of offering its car park spaces, according to its accounts.

As for those who opt to receive their initial investment back, they face a long wait (at least a year, plus however long it takes for Park First to transfer the title to their parking space) while they hope that Park First has enough money to pay them back, despite the significant net liabilities reported by Park First and its associated companies.

More misery for Store First investors as Store First tells them they are liable for business rates

Store First offered investors the opportunity to invest in storage pods with the promise of an 8% “guaranteed” return in the early years.

In a number of cases these guaranteed returns however quickly dried up; an investor has told us that they received the promised “guaranteed” returns for 12 months but these payments then stopped. Store First pods have been seen on Rightmove being offered for as little as £3,940 (almost certainly considerably less than the seller paid for them). Whether these pods were actually sold is not known.

On top of this, Store First has recently written to investors to tell them that they are liable to pay business rates to Barnsley Council (and not, as the Valuation Office had previously argued, Store First itself).

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Business rates are calculated based on the “rateable value” of a property – in this case the storage pod.

Store First’s letter says “Store First has been in negotiations with the Valuation Office to agree the best possible price for rates applied to individual storage units within the centre and we can confirm we have secured a low rate on behalf of investors”.

By “best possible price” Store First means the lowest possible price as the lower the value of a property, the less tax the business owner is liable for. So essentially Store First have been spending their time trying to persuade the Valuation Office that Store First pods are worth as little as possible.

Sadly for investors, the Valuation Office has apparently not taken the view that the storage pods are near-worthless, as otherwise no business rates would be charged.

Future developments

In 2017 the Secretary of State for Business lodged a petition in the High Court to wind up Store First and various associated companies. The petitions were adjourned in July 2017. At time of writing, a court date has still not been set.

Also in July 2017, Store First Limited extended its accounting period by six months, giving it another six months to publish its 2017 accounts. The accounts are now due to be filed with Companies House within the next month, by the end of March 2018. (Store First cannot extend the accounting period again as the period for the 2017 accounts is already the maximum eighteen months, plus you can only do this once every five years.)

Next steps

By being asked to pay business rates, investors who have lost money on Store First pods are effectively being forced by the Government to throw good money after bad. Among the owners of Store First pods are victims of the Henley Retirement Benefit Scheme and Capita Oak Pension Scheme, which means that yet again the taxman has gone after the holders of unsuitable investments rather than the people who have their money – reminiscent of HMRC’s bills for unauthorised payment charges sent to the victims of pension liberation fraud.

Unfortunately for investors, the rateable value determined by the Valuation Office is somewhat theoretical and based on the rent that the property could have been let for in 2015, based on its size, location and the nature of the property. The VO may have taken the view that it is not their problem that some Store First investors are unable to realise any rent from their property.

Nonetheless, it would seem well-advised for individual Store First investors to contact Barnsley Council and the Valuations Office as a matter of urgency and appeal the rateable value of their investment that Store First has “negotiated” on their behalf, on the basis that the market value of the property is considerably less. We are not able to say whether this has any chance of success, but it is surely worth trying. Details of how to challenge a rateable value can be found on gov.uk.

There is another obvious way out of this mess. Investors in Store First were told they had a “buy back option” after five years. A Store First investor has told us that when they applied to exercise the buy back option, they were told it is optional, and that Store First has another five years in which to decide whether to buy the investment back.

The solution is for Store First to offer to buy the investors’ pods back immediately at the rateable value they “negotiated” with the Valuations Office. If Store First has negotiated this value with the Valuations Office, they must surely believe it represents fair value.

While this would likely result in investors writing off a significant loss, it would free them from having to pay further money to Barnsley Council on top of what they paid for the storage pod. Store First, in exchange, would get their storage pod at a value they believe is fair, along with the yield from future storage customers.

Park First withdraws 8%pa guaranteed investment after regulatory action, offers existing investors 2%pa + variable dividends, or their money back if they wait a year

Park First previously offered investments in airport car parking spaces with a “guaranteed” yield of 8% in the first two years, followed by “projected yields” of 10% in years 3 and 4 and “projected yields” of 12% in years 5 and 6.

Park First is part of the Group First group of companies, which also owns Store First, which offered a very similar scheme offering “projected returns” of 8% in the first two years.

The Financial Conduct Authority took the view that Park First was promoting a collective investment scheme without authorisation and in December Park First agreed to stop promoting the original schemes and move to a “lifetime leaseback” model, which the FCA agreed was not a collective investment scheme, and therefore not its problem not an activity requiring FCA authorisation.

Money Marketing has now seen details of the new investment and reports that it “offers investors a fixed 2 per cent annual yield plus variable dividends from the management company’s profits.”

Accounts
What profits? (Source: Companies House)

2% per annum plus “variable dividends from profits” – which could be nil – is clearly much less attractive than a “guaranteed yield” of 8%. (Park First’s most recent accounts of 30 December 2015 showed a pre-tax loss of £200,000, so variable dividends will be nil unless profitability improves.)

Furthermore, investors in the original “8% guaranteed” scheme are now apparently being forced to either take up a “buy back option” to get their initial investment back – minus any rental income already paid to them – or switch to the 2% + variable dividends offering. Continuing in the original investment is apparently not an option.

In order to take up the buy back offer investors must hand back title to Group First and then give them a year to sell their space. This would appear to mean that investors must allow Park First to use their money interest-free for a year, plus however long it takes for title to be transferred, to get their original stake back.

In respect of the 2%pa + dividends option, it is questionable how many investors who originally invested expecting guaranteed returns of 8%pa (and 10% and 12% thereafter) would have been willing to invest in a small business in exchange for almost nothing except the hope of future dividends if Park First achieves profitability.

As there is no external market for spaces in Park First’s car park, investors would appear to have no other option available than the buy back option or switching to the new “leaseback” investment.

An investor tells Money Marketing: “I think for the FCA to deem this as a collective investment, and them just let Park First walk away by making a rather clumsy and unpalatable offer of their lifetime lease back scheme is deplorable.

“I have decided to take their buy-back offer, however this offer has many strings attached, like any usage payments would need to be paid back, and that you need to hand back title to the spaces to Park First, which then has a year to sell them. All in all, a great piece of leg work by Park First to make as much out of this as possible.

The FCA suggests that people who have already invested in Park First should seek financial or legal advice about which option to take, and say they will take no further action.

In other words, Park First investors are on their own.

This article was edited on 10 January to reflect a correction made to the original Money Marketing article.

Store First

Store First offers investors the opportunity to invest in self storage “pods” with a guaranteed return of 8% per annum in years 1 and 2, 10% in years 3 and 4 and 12% per annum thereafter.

The investment opportunity is not directly visible on Store First’s website (which is aimed at customers looking for self storage) but the investment opportunity is described on other pages such as https://www.storefirst.com/this-is-money/.

Status

The Government has filed a winding up petition against Store First and associated companies. As yet a court date has not been set.

There are a number of complaints on forums such as moneysavingexpert.com and whocallsme.com that investors have been unable to exercise the option to sell back their pods to the company, or sell the pods to a third party. These date back to 2014. More recently these problems have received coverage by the BBC and other mainstream press.

Store First has been involved in a number of pension fraud and pension liberation fraud cases where people have been encouraged to transfer their pensions into schemes which then invest in Store First. These have been extensively covered by the BBC and other media outlets. Store First says that it is not responsible for how others market their investment opportunity.

Who are Store First?

Toby Whittaker is Managing Director of Store First and the sole owner of Group First Global Limited, which in turn is the sole owner of Store First.

Can I get my money back?

If you were advised to invest in Store First by an adviser regulated by the Financial Conduct Authority, you can make a formal complaint against them. If they fail to give you a satisfactory response, you can complain to the Financial Ombudsman Service, who can award compensation of up to £150,000 (they can recommend higher amounts but these are not binding).

If you are awarded compensation and the adviser goes into liquidation, you can claim up to £50,000 from the Financial Services Compensation Scheme. If your adviser has already been liquidated you may be able to skip directly to this stage – check the FSCS’ list of defaulted firms.

Investors should beware of “fraud recovery fraud” where someone claims they can recover your investment or buy your investment off you, in exchange for “legal fees” or “liquidation fees”. If they ask you for money, it is a fraud. If someone wants to buy your investment, they will pay you, not vice versa. In a liquidation, the liquidator does not ask stakeholders for money; it stands first in the queue and takes its fee from any assets left, before making any payment to other stakeholders.