Luton Rising apparently sinking as auditors resign

Local group, Ladacan, has found that the 2021 accounts of Luton Rising (the company that owns the airport, and is owned by Luton Council) reveal serious problems.  The statement by company secretary Mark Turner that PricewaterhouseCoopers have resigned as auditors does not inspire confidence, in a company now burdened by eye-watering debt.  The resignation follows a serious disagreement between the auditors and the directors over the valuation of the Airport.  PricewaterhouseCoopers’ independent assessment put it in the range £835 to £1,300m, and they disagreed with the Luton Rising valuation of £1,488m. This is due to disagreement over the discount rate used in calculating the future value of current investment, and also about the impact of concession earnings. Luton Borough Council’s own auditors, Ernst and Young, have also been raising serious concerns during their efforts to sign off the Council’s own accounts. The valuation matters because of concerns about whether the money invested in the Luton DART light railway, under construction, will be recouped. There are concerns about whether Luton Council will have to provide yet more public money to the airport, and the lack of proper openness of the airport-council link.
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See more on the Ladacan website  https://ladacan.org/


Luton Rising apparently sinking as auditors resign

22.6.2022

From Ladacan (Luton And District Association for the Control of Aircraft Noise)

Everyone knows that aviation has been knocked back as a result of the pandemic. But the 2021 accounts of Luton Rising reveal far worse problems, which are better described as endemic. And the statement by company secretary Mark Turner that PricewaterhouseCoopers have resigned as auditors does not inspire confidence in a company burdened by eye-watering debt.

The resignation follows a serious disagreement between the auditors and the directors over the valuation of the Airport. With PricewaterhouseCoopers’ independent assessment putting it in the range £835 to £1,300m they clearly state “the directors’ valuation of £1,488m falls outside what we consider to be a reasonable range”. They give a number of reasons for the disagreement, including:

  • disagreement over the discount rate used in calculating the future value of current investment: the 8% value used by the directors is stated to be lower than the auditors consider appropriate
  • disagreement over the the treatment of the Force Majeure settlement in which the Airport Operator LLAOL was forgiven £45m of concession fees to account for the effect of the pandemic on its business. The directors’ valuation does not take account of the reduction in concession earnings, which the auditors consider unreasonable

Luton Borough Council’s own auditors, Ernst and Young, have also been raising serious concerns during their efforts to sign off the Council’s own accounts. During the Audit and Scrutiny meeting in January 2022, Robin Porter (LBC Chief Executive) closed down discussion on valuation by insisting that £1.5bn was appropriate.

When concerns were raised over whether the amount of money invested in DART (the new monorail from Luton Airport Parkway to the terminal) would be recouped, Finance Director Dev Gopal brushed them aside, insisting that the Council always undertakes proper business case assessment.

Yet in the LLAL accounts, a massive impairment write-down of £185m has been applied to the DART, slashing its value as a capital asset from £262m to £77m. This is due to reduced expectations on fare revenues, plus the cost remaining to operationalise the system (it’s still not in public use). The auditors state that changes to the operating cost estimates, which are possible during the coming year, could have a material impact on the impairment.

Whilst Luton Rising is still classed as a going concern, PricewaterhouseCoopers refer in their report to “Material uncertainty related to going concern” stating that under “certain severe but plausible downside scenarios it is possible that the company may need to obtain further financial support from Luton Borough Council or defer some interest payments due on the debenture interest”. This would of course put the Council in a difficult position with respect to the government requirement on it to reduce its financial exposure to the Airport in return for the COVID bailout funding.

With interest payments of some £35m due to the Council based on the half-billion pound Public Works Loan Board debt racked up by Luton Rising on its capital works and DCO application, and reduced concession income in 2022 (much of which is likely to be rebated to the Airport Operator anyway), the overall situation comes as no surprise.

The key concern shared by local communities is that the money which the Luton Rising Board has been pouring “down the drain” in the view of many, is public money, yet there is no public scrutiny over how it is spent or what decisions are made and why. Requests to the Council over how its members act with their Luton Rising hats on in private board meetings are met with refusals to answer due to commercial confidentiality.

With the resignation of the auditors, valuable continuity in awareness and visibility of the audit trail into the past will be lost. It’s hardly surprising that the image we have chosen to associate with this story shows hands raised: perhaps they should be clutching whistles?

Anyone wishing to read the accounts for themselves can download them from this link.

https://ladacan.org/luton-rising-sinking-as-auditors-resign/

Luton Rising apparently sinking as auditors resign

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Luton Rising is the name of the company that owns the airport.  Its website says:

“Luton Rising is a business and social enterprise that is owned by a sole shareholder, Luton Council, for community benefit, not private shareholders. Our largest asset is London Luton Airport ….” and it continues.


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The Luton DART is an under-construction automated guided people mover (light metro) which will connect Luton Airport Parkway station and Luton Airport.  DART is an acronym for Direct Air-Rail Transit. It is scheduled to open in 2022 and will replace the existing Shuttle Bus, relieving its roads in peak times and providing a higher capacity.

https://en.wikipedia.org/wiki/Luton_DART

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See earlier:

Luton airport continuing to be a financial drain (maybe £550 million+) to owners Luton Council

In the last few days, the company (owned by Luton Borough Council) that owns Luton Airport, has changed its name from London Luton Airport Ltd, to “Luton Rising”. That will be its trading name. The company that operates the airport is London Luton Airport Operations.  London Luton Airport Operations has obtained agreement from Luton Rising that it can retain £45 million over three years.  This will support the airport’s recovery from the pandemic.  The money would have been paid by the operator to Luton Rising (ie. the council) if it had not been for the impact of Covid reducing passengers and flights. Luton council usually, pre-Covid, made a good profit from the airport, but that has now been reversed. The Council in 2019 receiving a £19.1m, and £15.8m servicing debt.  In September 2020 there was a £60m loan by Luton Borough Council to its airport company and it was expected that another £23 million would be paid. Then in June 2021 Luton Council loaned a further £119m to the airport. Now this is another £45 million, over three years. The airport is not looking like a great investment for the council …

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Luton Council’s £60m loan to Luton Airport company set for approval ‘in private’

A £60m loan by Luton Borough Council to its airport company is set for approval, in private, by the executive later this month. The first of two emergency loans – together totalling £83m – has gained the support of Luton Council’s scrutiny finance review group, at the second attempt. The second loan worth £23m to London Luton Airport Limited (LLAL) is scheduled for the 2021/22 financial year, after the council’s emergency budget in July.  The Labour controlled council were forced by the Liberal Democrats to discuss the loan report in public. But officers asked for the council to take legal advice and defer the issue. It seems that 5 five Labour councillors recommended the council’s executive approve the £60m loan deal, with the 3 Liberal Democrats in opposition.  The executive will formally decide upon the loan at its meeting on Monday, September 14th. The Liberal Democrats said the almost £400m in loans are secured against the assets of the company. But, the council already owns all of LLAL’s assets by virtue of its 100% ownership of the company. It follows that for all practical and accounting purposes the £400m loans are unsecured.”

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