A financial report commissioned by Voice has shown that Malvern for All Ltd’s proposals for a cable car on the Malvern Hills are riddled with the most basic of accounting errors (The Proposed Malvern Cable Public). It might just be that the company spent too much time in their feasibility study (available on their website) trying to justify unjustifiable claims about the extent of disability in the UK and exaggerating the difficulty of disabled access to the Malvern Hills. It might just be that Malvern for All Ltd has zero accounting skills. Who knows? What we do know is that the two people behind Malvern for All Ltd should really send a donation to Voice as our report has saved them wasting any more time and saved their company from going bust.
The report certainly makes for a chilling read. So let’s take a brief look at some its findings:
- Instead of making a basic £1.7 million profit over twenty years for good causes in the local community, the reality is – using Malvern for All Ltd’s own figures – a loss of over £8 million. The company was able to create its profit forecasts by failing to recognise that televisions, washing machines, cars and even cable cars lose value over time. They depreciate. Providing for depreciation is the largest single factor in explaining why MFA’s profit forecasts are so wrong.
- Malvern for All Ltd offers no evidence for its £4 million cost of building a cable car. Real world examples quoted in the report show that figure to be a woeful underestimate. Doubling the £4 million gets closer to reality. But even that might not be enough. Building anything on the rock and slopes of the Malvern Hills is far more complex than building in open countryside. Not only will that mean more money to borrow and more interest to pay, it also means even more depreciation, making even greater losses than forecast.
- Another dodgy item is the unexplained and unjustified extra income of £100,000 per year (£2 million over twenty years) that Malvern for All Ltd calls franchise income. Franchise income is where business people pay a company a kind of royalty for the use of a brand name. McDonald’s is the obvious example. Using the power of the brand name generates extra income for business people running fast-food restaurants and business people are prepared to pay a fee to the owners of the brand name – the franchise fee. Who would pay a single penny for the exclusive use of the name “Malvern for All”?
With such dodgy figures as those used to justify the cable car, would you invest in it? And just in case you think you will be covered by the company, there is no share capital in the company. All the two owners have to do if (or when) things go pear-shaped, is pay in £1 each. That’s right. Their sole obligation, their only loss, is to pay in £1 each if things go wrong.