8 March 2012

NSL are losing money hand over fist (the same speed at which they hand out parking tickets)

Wardens picketing NSL at Ealing this month ( picture credit http://philtaylor.org.uk/2012/03/5820/ )
NSL Ltd was de-merged out of NCP in 2007. At that time it had existing parking enforcement contracts and doubtless that was a profitable operation overall.

Once NSL was on its own then every new contract win should have been the subject of a financial viability check as contracting with a company that has financial problems could lead to them leaving the contract at short notice and require a council to incur costs in getting back up to speed.

The Procurement Code of Practice requires the following ratio to be checked.

Profit on Sales (ROS)
(Profit before Interest & Tax) / (Annual Sales Revenue) X 100%
This measure provides an indication of a company’s profitability. Check business performance against other’s in the industry to see if profit margins are excessive or not The greater the better but check against competitor margins not excessive

NSL really should not survive that test as they are making thumping great losses.

Andrew Travers has to check the financial viability of NSL Ltd in accordance with the same rules.
Where the contract is worth more than £1 million, the Chief Finance Officer will perform the financial evaluation.

The Contract Procedure Rules state:

if the contractor is a subsidiary or a member of a group of companies then its parent company or another company in the group whose assets are sufficient shall be required to guarantee performance and indemnify the Council against loss from any default, unless the Chief Finance Officer and the Head of Legal so direct; ("direct to the contrary" one presumes although the rules do not say exactly- there would need to be a good reason for there to not be a bond. Mr Mustard will check.)

When the Award was made at Cabinet Resources Committee on 14 December 2011 the report said:

The pre-qualification stage of the procurement process involved evaluations of the applicant organisations’ experience, capability and financial viability. (Mr Mustard will ask to see the financial viability evaluation as it will be very interesting).
Here follows the latest available Accounts of NSL Ltd to 31 December 2010

NSL Ltd Accounts to 31 Dec 2010

Some interesting points.

Page 3: Note the sale to AAC Capital Partners.

Page 14. Look at that. Lost £2m in 2009 and another £2m in 2010. How the heck do you lose money when you are paid by a council on a cost plus performance related profit basis? Look at those accumulated losses since 2007. £26,974,000.  One wouldn't rush to sign them up as your service provider, now would you?

Page 21. Average income per employee is £33,189. If half are on the street and half in the office ( a bit of a guess, more are probably in the office ) then each warden is issuing tickets that get paid worth £66,000 p.a. so is probably actually issuing about £100k worth each year.

Average pay is £19,835 ( £87,534,000 / 4413 ). Many staff will be earning less than this.

NSL's pension contributions look a bit miserly at less than 1% of wages and salaries. This is probably due to high staff turnover. Not a career one thinks of is it, traffic warden?

Page 29. It is not possible to bring you the Accounts of the immediate parent company as it was only incorporated on 21 July 10 and so does not need to file any Accounts as yet.

Perhaps NSL Services Group Ltd can provide a guarantee for its subsidiary. Let us look at its Accounts.
NSL Services Group Ltd Accounts to 31 Dec 2010

Page 2. 25% of staff leave every year. An awful rate of staff churn and the case of Hakim Berkani cannot have helped. Read about it on the Nutsvillle site.

The Chief Executive expresses concern at the challenge faced by the retender of the DVLA contract. The outcome was £20m a year off the turnover of NSL and on to Crapita's. Turnover in NSL Ltd was £146m so the loss of DVLA will leave a large hole.

Page 10. Bonus loyalty schemes for employees. Would that be an oblique reference to Argos points for ticket quotas met?

Page 14. our employees are incentivised to meet our high standards of performance through a retailer points scheme.  Mr Mustard will be reminding you later, Pam Wharfe, of what you wrote to him, that Argos points for quotas will not be allowed in Barnet, if it creeps in when your attention is elsewhere.

Page 17. Losses at Group level are even worse. Total accumulated losses of £36m.

Page 26. The highest paid Director received £496,000. He can afford to pay any parking tickets that he gets. Do you suppose his car registration is in the NSL database so that any tickets issued to it automatically get cancelled?

Page 38. The immediate parent company is Nirvana Bond Ltd but as that was only incorporated on 2 July 2010 it won't be of much use for providing a bond nor will the ultimate holding company Nirvana Equity Ltd as that too was incorporated on 2 July 10.

Hopefully somewhere in this complex group structure Andrew Travers will be able to find a company with enough assets to support a guarantee that could be paid out if called upon. Every other council in the land who already use NSL, or plan to, had better take a close look at the finances of NSL.

Yours frugally

Mr Mustard

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