Quintessentially admits to accounting errors and unlawful dividends

Quintessentially, the concierge company run by Conservative party co-chairman Ben Elliot, made accounting errors of more than £7m and paid £1.4m of unlawful dividends to its shareholders, according to its long-delayed 2019 financial report.

Quintessentially’s auditor, BDO, which took over from PwC last year, warned the group faced a “material uncertainty” over its ability to continue operating, as coronavirus restrictions on travel and events could further hit sales and force it to raise emergency cash.

The 20-year-old “exclusive lifestyle management” company has attracted scrutiny for controversies including a £1.4m contract it secured with the UK government to introduce Whitehall officials to wealthy individuals and allegations about its working culture and accounting practices.

Quintessentially published its 2019 accounts this week, blaming a 15-month delay on a restructuring of its 30 subsidiary companies into its main business.

The restructuring brought its sprawling network of businesses, which include an art dealership, a florist, an estate agency and a chauffeur service, under one group company.

The latest accounts showed Quintessentially reported losses of £4.4m in 2019 on revenues of £50m.

They also revealed that losses in 2018 had to be restated to £5m, compared with the £3.1m previously reported.

Quintessentially’s latest accounts identified seven categories of errors in its 2017 and 2018 reports that required correction, amounting to about £7m. It made prior-year adjustments totalling £10.7m, which included group restructuring costs, that had a net effect of £2m on its balance sheet. These included incorrectly booking revenue before completing contracts, and incorrectly holding historic accruals on its balance sheet despite payments being made.

The restatements mean that Quintessentially was in negative equity as early as 2017. The company adjusted its £1.5m net assets for 2017 down to a £470,000 net liability in its latest accounts, a £2m drop in value.

PwC audited the company from 2014 to 2018. Some of the errors relate to companies that were not part of the group or were not required to be audited at the time the firm was its auditor. PwC declined to comment.

Quintessentially said: “In restructuring our group and consolidating 30 companies for the first time, and as is common in a reorganisation, we identified gross historical balance sheet adjustments, including corrections of £5.6m and impairments of £1.9m. Our business has continued to trade through the pandemic with the support of shareholders and is well placed for a rebound.”

The accounts also showed that Quintessentially paid distributions to some of its shareholders for three years while it “did not have sufficient distributable reserve” to do so. It paid out £1.4m more than it should have, according to the accounts. The UK Companies Act states companies must only make distributions out of realised profits.

Its shareholders include Elliot, Quintessentially chair Aaron Simpson, and co-founder Paul Drummond.

The company refused to name the shareholders who had received the payments. The person added: “Our recent audit identified an error in the assessment of distributable reserves between 2014 and 2017. The shortfall has been resolved via a share capital reorganisation.”

BDO ultimately signed off Quintessentially’s accounts on the grounds its directors claimed they could obtain more funding if needed.

Quintessentially turned to its US shareholder World Fuel Services, a New York-listed energy and aviation company, for a £6.8m loan in August. Part of the loan was used to repay a £941,000 overdraft Quintessentially had with Barclays. As a result of its loan, WFS now holds security over the company’s assets.

The accounts revealed that “certain directors” of Quintessentially have made “personal guarantees” over the new loan from WFS, which means they could be held liable for repayments if the shareholder calls in its loan and the company cannot repay it.