(Pictured: Mark Thomas)
by Greg Bright*
The administrator of van Eyk Research, Trent Hancock of Moore Stephens, is negotiating with a single party, believed to be Lonsec Fiscal, to buy the troubled company. He laid out a litany of problems, accrued over the last three years, for creditors to see last week. Another meeting this week will decide whether to put the business into liquidation and hand over files to ASIC.
As far as insolvencies go, however, van Eyk looks to be, at least on the surface, not in such bad shape. The administrator’s report, quoting figures as of September 15, put its net assets at $11.17 million. Unfortunately, most of that is in loans to subsidiaries. Hancock said he was currently determining the collectability of those loans. If the inter-company loans are removed, the net assets were $58,190 as of June this year, compared with $694,998 as of June last year.
With the Blueprint funds, suspended by Macquarie Bank, the responsible entity, accounting for about 60 per cent of the group’s revenue, most of the income now comes from the iRate research subscription service. Hancock told creditors this is what most of the parties interested in buying van Eyk actually wanted. iRate provided revenue of $2.085 million in the year to June, down slightly from $2.27 million in 2013.
The administrators, who were appointed on September 15, have so far racked up $227,509 in fees. They will ask creditors at the next meeting on October 21 to approve a further $200,000 or so. Their average hourly rate, with 13 people on the job, is $403.00.
So, how did it come to this? van Eyk once boasted a market share of 70 per cent of the financial planning industry which used external research. The Blueprint funds had up to $1.5 billion under management.
It would seem that not all was well prior to the Macquarie Bank action. Hancock said the investigations into the reasons for Macquarie terminating the company as fund manager of the Blueprint series were ongoing. Blueprint had been in decline for the past three years, with FUM of $795 million as at June this year, compared with $912 million in 2013. The consolidated accounts for the group, including subsidiaries, show a loss of $19,515 in 2011, a loss of $1.37 million in 2012 and a loss of $890,526 in 2013. The fledgling New Zealand business was a contributing factor, generating revenue of $1.29 million in the year to June 2013, but incurring expenses of nearly $3 million.
Both the administrator and Mark Thomas, the van Eyk chief executive and largest shareholder (with family interests), say the main reason for the company’s failure was the action by Macquarie. This was taken after it became apparent that a sum of $31 million was invested by the UK fund manager Artefact in “illiquid” assets. Thomas is quoted in the administrator’s report to creditors as saying that the “illiquid fund” represented only 3.75 per cent of total assets. He is also quoted as saying he believes the funds were “misappropriated”. Hancock also says he is examining whether the company traded while insolvent prior to his appointment.
This is not the definitive story on the demise of van Eyk. There may well be litigation into various arrangements from various parties, including Thomas. When the definitive story is written, however, it will likely point to the major rift between Thomas and the company’s founder, Stephen van Eyk, as the catalyst for the decline. Stephen van Eyk sold his shares and left the firm in 2010 after a boardroom battle for control. He and Thomas had worked together for more than 20 years. They were an odd couple that built, arguably, the best brand in its field.
Pyne Gould Corporation became a cornerstone shareholder, buying most of Stephen van Eyk’s shares, but sold out to Australasian Wealth Investments last year. Hancock’s report notes that Thomas has no assets to speak of, apart from his van Eyk shares. Hancock’s report says: “My preliminary investigations indicate that the director [Thomas] does not own any property and may have significant personal debts.”
Stephen van Eyk is a mercurial character who was highly regarded by the planning industry for his devotion to research. While the research and asset consulting part of the van Eyk business was not the main revenue spinner, it is now clear in hindsight that it was crucial to the reputation of the Blueprint funds.
ASIC issued the administrator with a notice to produce records on September 18 and Hancock says he is “continuing to assist ASIC with their inquiries”. He is recommending to creditors that they vote to have the company wound up, and to appoint him as liquidator.
As of last week, van Eyk had 15 employees and Hancock was still paying wages.
*Greg Bright is a director of Pyne Gould Corporation.