I, and other bloggers (here, here and here), have previously covered the collapse of Dore, a business promoting an unscientific and ineffective treatment for dyslexia and other specific learning disorders, into administration and their subsequent reincarnation, fronted by former rugby player, Scott Quinnell, as Dynevor CIC, a Community Interest Company (CIC), under the Dore brand. Now Dynevor have released their accounts and it looks like the new business is in as much financial trouble as the old one was.
Despite an £810,000 investment from shareholders, the liabilities of Dynevor outstrip their assets by £215,462 as of 31st December 2009. However this calculation assumes that the Intellectual Property (IP), the Dore method and branding, is worth £115,046. It is not specified how Dynevor calculated this figure, but it can only be an estimate as IP is essentially intangible and its value can only be inferred from its potential to increase profitability. Given that Dynevor’s IP is not considered credible by experts in learning disorders and the failure to create a profitable business out of it it can be reasonably inferred that Dynevor’s estimate of its worth is highly optimistic. It is thus likely that assets minus liabilities as given is an underestimate.
The accounts also point to problems with establishing a profitable client base. The companies debtors (presumably mainly customers paying via finance schemes) and cash in the bank are worth £102,023 and £105,110 respectively. They owe their creditors £212,357 within one year, a deficit of a few thousand pounds that only results in a positive value for net current assets as they have ~£30,000 of stocks, which naturally depreciate. Given that the programme costs ~£2,000 pounds this implies a client base of little more than 100 customers at most. While this might sound like a lot for a small business, there are likely about 15 staff on the payroll, it is clearly not enough to be profitable and even if they pay their staff no more than £10,000 it is hard to see a steep rise in profits any time soon. This seriously questions their survival given that they owe ~£500,000 in the long term.
Dynevor were asked to comment on their profitability but did not respond.
I would not be surprised if Dynevor were to enter administration soon, just as Dore did. The only possibility for long term survival would be for further loans, presumably from the shareholders as I doubt banks would consider it a safe investment, in the hope that business improves. However, unlike Dore, whose owner, Wynford Dore – a multimillionaire, had sufficient personal investment in his business to prop it up for many years, the current shareholders may be more hard headed about cutting their losses. These shareholders are rather mysterious – the directors of Dyenvor, Scott Quinnell and Glen Allgood, own a small minority of shares (respectively ~3% and ~2.5% of the total), placing the business outside their overall control beyond day to day decisions. It is not their decision whether or not it survives.
Last time Dore collapsed existing clients were left with substantial losses, they were low down on the list of creditors and Dore made little effort to keep them informed. Should Dynevor collapse it is likely that clients will be in an even worse situation. This is because Dynevor is CIC, this means that its assets are ‘locked’ and are not availably should the company be wound up or go into administration, instead they would be transferred to a nominated body, in Dynevor’s case the inactive charity ‘The Dore Foundation’. This would leave Dynevor’s creditors with nothing.
I have previously examined the problems with Dynevor’s application to become a CIC, including unjustified claims of efficacy and the lack of published accounts. This latter concern, now that we have the accounts, points to a serious problem with the CIC regulator, the official that confers CIC status. The CIC guidelines state that companies financial situation, especially the Current Ratio (Current Assets/Current Liabilities), should be considered. As Dynevor’s Current Ratio is ~1 (2 is usually considered healthy) it is possible that had the CIC Regulator seen their accounts their approval would not have been given. That they granted CIC status without checking Dynevor’s financial situation is a failure, and one that will be costly to Dynevor’s clients should the company go into administration.
The CIC Regulator is supposed to be a ‘light touch regulator’, but the situation with Dynevor suggests neglect rather than a light touch and raises serious concerns about oversight of this entire sector.
