Noble to adopt more conservative accounting practices

Noble Group will try to match its profit and loss statement with its cash flow as much as possible, said chairman Paul Brough yesterday.

He also said he was optimistic that the group would soon reach a consensus with perpetual bond holders and shareholders on its restructuring. He told the group's special general meeting that its ability to make money from incremental businesses is "severely restricted" because of the limited trade finance facilities it has access to.

"That is why we have undertaken more conservative approach to reserving against these (coal) contracts," he added. "One of the issues we've had with complying with international accounting standards is that there is a difference between profit and loss, and cash flow.

"One of our intentions is to try to match cash flow with profit and loss accounts, and that is what we expect one of management's incentives to be based upon."

So if the firm makes a paper gain, it would reserve against that gain so that profit and loss and cash flow would be similar, he added, emphasising that it will adhere to international accounting standards.

Noble's aggressive accounting practices were attacked by Iceberg Research three years ago.

Iceberg and, more recently, Noble investor Goldilocks Investment Company have accused the firm of inflating its bottom line through overly high valuation of long-term contracts and derivatives.

Mr Brough also told shareholders that they should not be surprised by the events of the past few months, saying that the "pushing and shoving" between various groups of stakeholders is par for the course in a consensual restructuring where there is no predetermined hierarchy of claims.

"I believe we are close to reaching a consensual position," he said.

"While we can all argue over the patient, we don't want the patient to die on the operating table as we are stitching him back up. The company cannot continue to incur costs and trade while insolvent. So I hope we can move the patient into the recovery room very soon."

Asked about the remuneration for directors and chief executive Will Randall, Mr Brough said the directors and management have worked very hard over the past year. "Since I joined last May, we've had 40 board meetings... I think the directors' fees are modest in comparison to other companies' and the work they have been asked to do."

The turnout yesterday was notably smaller than past shareholders' meetings. Noble had said only on Sunday that the event would continue as planned. Noble shares closed down 0.4 cent, or 4.6 per cent, to 8.3 cents yesterday.

A version of this article appeared in the print edition of The Straits Times on May 01, 2018, with the headline 'Noble to adopt more conservative accounting practices'. Print Edition | Subscribe