Thursday, October 29th, 2009 at 12:43 pm - - Vero

More entertaining financial farting going on at Vero which, in my opinion, is socially and productively useless — as is practically everything that is currently part of our godforsaken corporate financial structure.

Let’s start with some tedious biased history gleaned from 5 years of company annual reports…

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Thursday, October 1st, 2009 at 9:35 am - - Vero 2 Comments »

This is a follow-on from Financial nonsense at Vero.

The line Noble Enterprise VCT has dropped out of the table. Searching for this name on google returns a Foresight VCT webpage, which says:

In the late 1990’s, during the Technology “Bubble”,[sic] Foresight significantly outperformed the wider technology market and generated returns that made it the leading VCT Manager. It has continued to prove itself more recently by having been awarded three existing VCT mandates from other managers. It is testament to Foresight’s standing within the industry that in 2004 it was offered the mandate to take over the management of two Advent VCT funds, subsequently rebranded Foresight 3 and Foresight 4 VCT and the Noble/Enterprise VCT, subsequently rebranded Foresight 3 ‘C’.

So it appears that some paper is being shuffled around.

But what the heck are these VCT’s anyway?

According to this 2004 BBC article, VCT investments receive an almost matching tax-payer subsidy:

In order to encourage investment in these companies, VCTs were designed with generous tax breaks.

Investors receive an upfront 40% tax relief.

In other words if you put £10,000 in, this could only cost you £6,000 by the time you have had your tax rebate.

And the tax free boost doesn’t stop there.

Any capital gain or dividend paid from the VCT is also completely free of tax.

A 2005 article published by everyinvestor decrying the reduction of this tax break to 30%, explains the money-making potentials:

How a loser can still be profitable … [S]ince a £1 share actually costs you 60p, the managers can make a lot of mistakes before they lose 40% of your money. In other words, you only need a very modest rate of return on the investments to come out with a healthy return thanks to the tax break. Say the £1 share is still only worth £1 after five years. Since it cost you 60p, you have actually made an annual return of 10%, which is of course net of tax. Even if the shares were worth under £1 you could still be making a reasonable profit on your real net investment.

The same article adds at the bottom:

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Monday, September 28th, 2009 at 11:41 am - - Vero 2 Comments »

The Freesteel blog has a history of being interested in the Vero Software company, among others.

Here is an unusually interesting Vero Software 17 September 2009 press release:

The Board of Vero notes the recent movement in the Company’s share price. The Company has received a provisional approach from a financial institution that may or may not lead to an offer being made for the Company. Discussions are at a very early stage and there can be no certainty that an offer will be forthcoming.

In accordance with Rule 2.10 of the City Code on Takeovers and Mergers, the Company confirms that it has 37,261,166 Ordinary Shares of 0.5p each in issue and admitted to trading on the London Stock Exchange under UK ISIN code GB0002678273

Here’s what that looks like:

veroshareprice

The daily breakdown in volume is 173,907 at £14.50 on 15 September, 366,264 at £20.50 on 16 September, and 164,969 at £18.25 on 17 September from the News Analysis tab on the London Stock Market page linked to from here.

I don’t know exactly what the numbers mean (being a mere software engineer), but it looks like a blip, particularly in light of the following press release:

NOTIFICATION OF MAJOR INTERESTS IN SHARES

Full name of person(s) subject to the notification obligation (iii): Foresight 3 VCT plc
Date of the transaction: 16 September 2009
Date on which issuer notified: 17 September 2009
Threshold(s) that is/are crossed or reached: 3%

This information hasn’t yet been entered into the table here:

Shareholder Ordinary 0.5 pence shares % of issued share capital
P. Gyllenhammar 8,253,722 22.2
D. A. Babbs 4,903,380 13.2
E. Galardo 3,440,474 9.2
Artemis AIM VCT plc 2,325,582 6.2
Baronsmead VCT 2 plc 2,325,582 6.2
Baronsmead VCT plc 1,600,000 4.3
Baronsmead VCT 3 plc 1,395,349 3.7
Noble Enterprise VCT 1,330,233 3.6
M. Cignetti 1,259,866 3.4

Now that I have archived it, when they update the webpage it’ll be possible to infer who sold the shares to Foresight. Later in the year, if I stay on this story, Foresight may disclose how much they paid for Vero stock in one of their brochures.

Speaking as a mere Software Engineer, I know that the further you get away from the coal face, as it were, the less you know. The Vero management — according to their website materials — lead you to believe that they have an extremely limited interest in the software engineering (all they ever talk about is financial engineering).

The VCT investors, being even further from the centre of activity, almost certainly know nothing about the state of the software development of the company. And there’s nowhere they’ll find the information out because the financial structuring is entirely walled off from the actuality.

When you know nothing, all you can do is follow others. A good lot to track are the company directors, as they ought to know a thing or two about the value:

verodirectordealings

As you can see, the company poured a load of shares into the pockets of the directors in 2004, and they haven’t sold them yet. Either they have confidence in the company, or they are not selling to prevent others losing confidence.

If I had time to go through all their Annual Accounts again, I’d be able to tell whether any of the programmers have been given shares. (I don’t think so.)

The programmers are going to know if they are being beaten on features by their competitors, or whether they have just thought of a brilliant killer feature, so they buy some shares in advance because they know their work is going to make the company a lot more valuable, they hope.

Somehow I don’t find that story very convincing, even as an idealistic argument.

As has been demonstrated conclusively over the last few years, the whole financial engineering methodology in the western world is bunk. It has resulted in a severely damaging misallocation of wealth away from places where it could result in a lot of value being created, and towards socially useless activities.

In the Vero company, the distinction between such activities is stark. Value (for everyone concerned) is created by the debugging and improving of the software which they sell and is widely used, whilst farting around with share dealings and corporate technicalities (though probably much harder to do), is arguably totally useless.

Unfortunately, you can get a lot more power and money by focussing all your efforts on the latter while virtually ignoring the former.

There hasn’t been a much public debate as to why the financial system doesn’t work — according to the way it diverts resources away from where it is useful. I am not interested in moralistic ideological arguments about ownership rights, freely entered into contracts, capitalist libertarian theory and related bollocks. The question is, does it actually perform well? Can we introduce rules and regulation so that the results are not so self-evidently poor?

Often the diagnosis of the problem centres on the presence of conflicts of interest. Brutal transparency is the current prescription, tried only when the corporate-owned government is broke and can no longer treat the symptoms with bail-out money.

But I don’t think that’s the full story.

I think the root cause of the problem is that those who disburse the money have no knowledge and no information about the businesses they are investing in. This makes their decisions easy to cheat on the one hand. And on the other — when they are not being cheated — likely to be based on bollocks. They may as well be picking lottery numbers.

But, you say, people don’t have time to check out every company they invest in to the detail necessary. It’s too complicated and fast moving. And they have no right to speak to the employees directly.

And I say, Exactly.

Perhaps it’s a consequence of the extreme concentration of wealth today. The few who have control of most of the wealth don’t have any time to consider where they are putting the money. So it gets done poorly and with little concern for the effect.

And the people who do know how stuff work — for example, the employees in the businesses — are not at any time represented in the market place.

So why is anyone surprised when there is so much systematic misallocation of wealth?

Wednesday, March 12th, 2008 at 7:56 pm - - Vero 2 Comments »

You just can’t make this up!

On behalf of Vero Software, I as Chief Executive, make a commitment that we shall:

  • Actively encourage and support our employees to gain the skills and qualifications that will support their future employability and meet the needs of our business/organisation.
  • Actively encourage and support our employees to acquire basic literacy and numeracy skills, and with Government support work towards their first Level 2 qualification in an area that is relevant to our business/organisation.
  • Demonstrably raise our employees’ skills and competencies to improve company/organisation performance through investing.

Don Babbs

Same photo appears at novo executive research consultancy whose mission is “to make a significant commercial contribution to our clients’ successes through delivery of imaginative, creative and effective consultancy solutions.”

Now I’d be surprised if either a CAD/CAM company or a corporate executive recruitment company has managed to hire an employee without basic literacy and numeracy skills; and if they did they’d probably sack them immediately. It’s tough out there in the world of business: no room for dead wood losers or people who won’t contribute all their time to the bottom line.

But this is a Government idea. People obviously get a different perspective from the top of the heap above the sht storm. Weird ideas surface from there. To a Prime Minister or President, all these business leaders seem like jolly good chaps, don’t they? It’s as if they’re quite ignorant of the inherent nature of hierarchies: people in them treat those above with the greatest respect and humility, and those below as scum of the land who must pay back every right to a decent living.

There are transcripts of the Skills Strategy launch in June 2007 on the website of the Department for Children, Schools and Families, rather than where you would expect on, say, the Department for Innovation, Universities & Skills. How this strategy fits in with the third stupidly named Ministry, the Department for Business, Enterprise and Regulatory Reform, the one in charge of selling out to liaising with corporations, I do not know.

Isn’t it sweet how they care so much about us? All those junior ministers and corporate executives appearing in videos on the website Skill Stories, which has some very skillful graphics. I’ve surfed it for an hour and could find no substance in any form I could recognize. There is one dodgy statistic about functional illiteracy repeated ad nauseum by the likes of The Right Honourable Lord Jones of isoft Birmingham (Digby Jones) at the skills strategy launch event:

What I do is not on behalf of the government. I’m not the government skills envoy, I’m the UK skills envoy. I don’t do this for the government, I do this for the country because this is so important. But we do need a government representation to do this and there is a new commission, as you know. The new chairman is being announced today and he’ll be coming in with Gordon and Alan. More of that anon.

As you know, there are 7 million adults in this country today who are functionally illiterate. There are more than 11 million adults – some say it’s up as much as 17 million – who cannot add up two three figure numbers. That statistic has probably got better over the last few years, not worse. But of course, in the past, we used to put them down the pit, we used to put them in the fields, we used to put them in lime and oil and car factories, we used to put them in shipyards and woollen mills, cotton mills and steel mills, and those jobs have all gone. If we don’t do something about this, if we the employers in the public sector, in the private sector, in the third sector – the voluntary sector – if we don’t do something about this, this country is going to have a very, very nasty century.

Now I agree that it is going to be a very, very nasty century, and it is something to do with the lack of political literacy of the working class who would have strung up this bunch of clowns in jail a decade ago if they had any sense. Extraordinary rendition is good enough for any politician who is willing to lie that it isn’t happening.

In the first seven years of this century, the self-proclaimed literate ruling elite has — all by itself — sunk the world into a 6 trillion dollar war, presided over an utterly unnecessary financial crisis, and have participated in a morally unforgivable delay and denial about the need for action on climate change. This century is not going to end well. How nice of them to be concerned about whether we have enough skills to be put to use on their thoroughly evil schemes.

I have programming skills by the bucket-load, and so do many of my friends. But the standard business logic and employment contract law under which most people work forbids them to discuss or transfer those skills to other people. It’s commercially confidential, you see. Those skills are for them. They’re not for you and your friends. Even if it was your friends who taught you to program.

Friday, January 11th, 2008 at 6:48 pm - - Vero 2 Comments »

Uh? What in earth is going on over at one of my favourite CAM software companies?

New venture for Vero

The company believes that there is a new market in the provision of a graphically enabled Business Intelligence tool that can analyse and present unique insights into very large sets of data. To that end it has licensed the leading data mining solution Mineset… Don Babbs, Chief Executive of VI says, “While Business Intelligence tools have become the norm for the financial and consumer markets the value within the ever increasing data belonging to the manufacturing industry has been largely overlooked. The formation of an experienced data mining team together with our source code applications based on the renowned Mineset engine will see the start of a process allowing manufacturing and industry users alike to unlock the benefits of their data collection systems.”

A quick bit of checking out sees that we have a block-copy of all the pages from Purple Insight (eg news 2004 of Purple Insight) to Vero Insight (eg news 2004 of Vero Insight).

The product retails at around $200 for a crippled version [link] and makes all kinds of incomprehensible claims, like:

Deployed network bandwidth grows 3X annually – suppliers and users can’t track all security threats or optimize efficiently. Cyber-terrorism has increased 50% in the last year.

Due to Mineset’s unique ability to manage and visualize vast quantities of data it has become an ideal tool for detecting Network Intrusion:

Network intrusion or ‘hacking’ is a common element of all networks, whether it is malicious or simply just for fun, as is often the case today – it still presents a massive threat to organizations. An article in Network Magazine in May 2002 highlights the potential for not only the immediate cost of a network outage from a ‘Denial of Service’ attack but also the attendant bad press, dissatisfied customers and business partners, and furious executives.

Me, I can’t see anything here that can’t be done with VTK combined with some nimble Python scripts, but not everyone can program.

Sure, you can throw up 3D splatter plots of grand and pointless consumer data, I mean, if the parameters are things like engine size, fuel consumption, acceleration, consumer spending over time by gender and age, the likelihood of having callerid for the various groups such as age, occupation and type of car driven, then this is not exactly going to get us to the future.

Meanwhile, the world-famous visual data animation demonstration is a system known as gap-minder, as demonstrated by this presentation here:

So, given that this is a well developed field, with all its own foibles and plodding development in interesting directions, but with no obvious connections to CAD/CAM whatsoever, why on earth is Vero having anything to do with it? After all, it was dumped by SGI a few years ago because it didn’t fit with their business.

Hmm. I see an explanation. The drive from Purple Insight in Quedgeley, Gloucester to Vero’s offices is 11.5 miles.

Now, the drive to Camtek, recently acquired, was pretty short too, but at least it was in the same business. Who knows what the rules of business are. Maybe when it’s too difficult to buy up companies in the sector internationally, you simply grab random ones that are in the immediate locale. Who am I to argue with this world? The customer is always right.

Sunday, December 30th, 2007 at 10:29 am - - Vero 1 Comment »

I am not an accountant, but how hard can it be? It’s only numbers that are supposed to add up, which account for money — the be all and end all of all business these days.

I happened to find myself on a very long train journey from Stuttgart to Berlin last week, and happened to have downloaded all of Vero Software’s annual report and accounts from 2000 to 2006, and read them. You know all those useless tables of numbers you normally flick through because you’re eyes have glossed over? Well, I started pulling some of the numbers out from them and putting them into another table which graphs the changes over time.

In the following table, £30k means £30,000. When two numbers are given, for example the £1007k or £955k for the 2001 development costs, the first is the number in the 2001 accounts, and the second is from the 2002 where they were restated for comparison, and the number wasn’t the same.

These discrepancies might be due to incompleteness of the main accounts, changes in accounting procedures, restatements backdating the values of company acquisitions for comparison, and so forth. If so, I can’t tell, because they don’t show the workings, and you would expect to see inconsistencies in the value of “number of developers”, which you don’t.

Some of the workings remain for the Kleban column, which refers to the amount of money paid to Kleban and Samor Attorneys in New York City for form filling, at which one of the directors was employed, so is declared as a conflict of interest. The 2000 accounts say they were paid £54k, the 2001 accounts say they got an additional £67k making a total of £121k, and the 2002 accounts report “The aggregate of fees amounted to approximately £74,500 (2001: £121,000).”

I did have the column for Acquisitions, but due to “amortization of goodwill”, the numbers are totally useless and all over the place. The rest of the columns are described below.

Year turnover development costs developers Other income Directors Babbs Kleban
1999 £4545k £614k 16 £142k £355k £81k £0
2000 £5216k or £5642k £1077k 22 £1k £418k £103k or £102k £54k
2001 £6128k or £6456k £1007k or £955k 21 £132k £525k £116k £67k (Ivy £14k)
2002 £6984k or £7542k £1282k 25 £458k £531k £138k £74.5k (Ivy £21k)
2003 £8823k £1350k or £1450k 30 £282k £495k £143k £75k (Ivy £43k)
2004 £9698k £1339k 30 £228k £479k £146k £36k
2005 £9936k or £10196k £1446k or £1268k 31 £95k £520k or £531k £161k £26k
2006 £11027k £1471k 37 £75k £563k £166k £1k

The columns are:

Directors – the total pay of the board of directors, which is between 5% and 8% of the turnover per year. Officially they are paid this much to stop them going off to get jobs elsewhere in the industry, at great loss of talent to the company. Since they have all been there for years, it doesn’t look like there has ever been a threat followed by a bluff-calling. The highest paid director, Babbs, has his own column.

Kleban has already been described. Ivy refers to money given to another director’s financial company for financial bureaucracy. More about this some other time.

Development cost and developers is the investment and number of staff in that part of the company. In business, there’s usually a conflict between the customer’s interests and the shareholder’s interests. Put simply, if you buy software from a company, the only thing you get are what the developers have done for you. That and part of the sales support, I suppose — the ancillary materials. But, for example, if the company blows half its turnover on a beautiful headquarters building, or Jaguar cars for the directors, you don’t get those. The development costs tell you what the cost price of the product is.

For me, the most interesting column is other income, because here the numbers really don’t add up at all. There is a paragraph in the accounts that says:

Government grants are credited to the profit and loss account as other income to match the period in which the costs have been incurred provided that the grant has become receivable and there is reasonable assurance that it will be received.

Now, I happen to have tracked down a statement about Eureka grant E!2551- VISI-XX which reports 6.1million euros split 70%-30% between Italy and The Netherlands between 2001 and 2003, listing Vero Software as the main participant. The company was originally founded in Italy before it moved to the UK. If you do the sums, it rounds to about £3million over those two and a half years.

So where has all that money gone? The other income column certainly does not add up to this sum. I am conducting further investigations.