Examination of Witnesses (Questions 100
- 119)
WEDNESDAY 21 OCTOBER 2009
MR ANDREW
STAFFORD AND
MR ADAM
LAWRENCE
Q100 John Thurso:
You had, I think, a bit of a spat with the Birmingham Mint, which
has now been settled, I understand, for a relatively modest amount
of money. In the annual report it says there is no basis for a
claim. Why did you choose to settle out of court at all?
Mr Stafford: The case goes back
a long time, it goes back to 2002 when the matter was—when
you say we've had a spat, the current management have certainly
not had a spat. The Birmingham Mint—
Q101 John Thurso:
They inherited one then?
Mr Stafford: They inherited a
spat. We sought to resolve this to avoid any further cost to the
public purse. We were advised that to take this matter to trial
would have incurred at least another three-quarters of a million
pounds in legal fees, and even if we had won but not been awarded
costs then we could have been incurring significant costs. So
to settle the whole matter for £100,000 was a very sensible
way of settling the matter and avoiding any further risk to the
public purse.
Q102 John Thurso:
It was a purely commercial decision?
Mr Stafford: Yes.
John Thurso: One last question, if I
may.
Chairman: As briefly as you can, because
we are up against the clock.
John Thurso: In that case, that is fine,
I am done.
Chairman: We are up against the clock
today because we have to finish at half past.
Q103 Jim Cousins:
Mr Stafford, I listened very carefully to the answers you gave
to the earlier questions, but as I understood it you already have
some relationships with private sector banks?
Mr Stafford: Well, we have some
of our banking facilities provided by private sector banks. They
are not in any way equity stakes, but we obviously have some of
our banking facilities with private sector banks, correct.
Q104 Jim Cousins:
And your Russian contract?
Mr Stafford: That is an arm's
length commercial arrangement with a private sector organisation
in Russia which is the supplier to the Russian Mints. So we contract
with an organisation called Tenzor, which in itself then contracts
for the supply of coins to the Russian Mint.
Q105 Jim Cousins:
So what you are is a trading fund? You are able to enter into
these commercial arrangements and in the case of the Russian one,
I guess, Russia being Russia—
Mr Stafford: Forgive me, this
is us supplying them with a product. This is nothing to do with
the way we finance our balance sheet, this is purely—
Q106 Jim Cousins:
But it is a long-term arrangement with them?
Mr Stafford: Yes. We have never
said we cannot—
Q107 Jim Cousins:
How do you carry the risk of that arrangement?
Mr Stafford: Forgive me, we receive
a payment up front for the goods before we supply it. We have
a very large percentage of the goods paid for before we deliver.
Q108 Jim Cousins:
You transferred an unusually large amount of money from your reserves
into your profit and loss account last year?
Mr Stafford: I will ask my Finance
Director maybe to answer the technical points if I may.
Q109 Jim Cousins:
You transferred £8 million into your profit and loss account?
Mr Lawrence: Sorry, that is our
profit for the year, so if you look from year to year at our reserves
that is the movement in profit.
Q110 Jim Cousins:
And that made the total in your profit and loss account—
Mr Lawrence: No, no, that's an
impact on profit as well, a shift in reserves
Q111 Jim Cousins:
No, no, the total now in your profit and loss account is about
£50 million?
Mr Lawrence: That is our retained
profits.
Q112 Jim Cousins:
Yes, so how much of that might you consider investing in these
arrangements that you have referred to?
Mr Lawrence: There is a big difference
between retained profits and cash. Retained profits is effectively
the built up profits for years and years and years. You wouldn't
necessarily reinvest that. That's the shareholders' capital, so
if the shareholder wanted that back we could repatriate that back
to the shareholder, which we do via dividends every year.
Q113 Jim Cousins:
How much will that be valued at when you become a Government-owned
company?
Mr Lawrence: Well, you typically
wouldn't value a company based on the retained earnings.
Q114 Jim Cousins:
No, it would be transferred into it, would it not?
Mr Lawrence: Probably not. You
typically wouldn't do that in this business.
Q115 Jim Cousins:
So does that mean the Government this year will get that money
back?
Mr Lawrence: No, but if the Government
wanted to call back their retained earnings they would be able
to call that back via dividends and the shareholder would ask
us to repay some dividends if they wanted to do that.
Q116 Jim Cousins:
And they have not asked you to do that?
Mr Lawrence: Well, we do. Every
year—for the last couple of years—we have given roughly
a £4 million dividend.
Q117 Jim Cousins:
£4 million, but there is £50 million in the—
Mr Lawrence: But I don't have
£50 million of cash to give you. If you want it, I could
go and leverage the balance sheet, get a loan and give you some
money.
Q118 Jim Cousins:
Do forgive me, Mr Lawrence, Mr Stafford was very proper earlier
about his powers vis a vis ministers. You must understand
this Committee has no power to compel you to do anything with
your money.
Mr Lawrence: No, I am not meaning
you personally, the shareholder. If the shareholder wanted that
cash back they could extract it. The way they would have to extract
it, though, would be to actually finance up the balance sheet
because we don't have enough cash to give you that £50 million.
Q119 Jim Cousins:
Your target for return on capital is 10%?
Mr Lawrence: Yes.
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