The boss of Elmfield Training Ltd has been accused by an MP of a “rip off” over his firm’s high profit margins which have been generated by the public purse.
Ged Syddall, founder and chief executive officer of Elmfield Training Ltd, was joined by Norman Pickavance, HR Directer at Morrisons, to give evidence to the MPs on Business, Innovation and Skills (BIS) Select Committee at the Houses of Parliament this morning, and confirmed he received 95 per cent of a £3 million dividend for their 2009/10 financial year.
The news came during the fourth evidence session of the committee, which is leading an inquiry into apprenticeships.
When asked about how much of the £12.3 million pre-tax profits made by Elmfield Training Ltd was government money, Mr Syddall said: “It was all government money.”
Committee chair Adrian Bailey MP said that the profit figure amounted to a 36 per cent margin for the academic year.
The reasons behind the margin, Mr Syddall said, were due to “natural efficiencies” of dealing with large employers.
Quite frankly that much money made out of the business of your kind is a rip-off.”
Mr Syddall, although unable to provide a profit figure for Elmfield Training in 2010/11, said that this year’s margin would be “13.8 per cent” and explained that the decreasing margin was down to a reduction in rates.
He said: “We get paid 25 per cent less now than we did in 2009/10,” before Mr Bailey added: “But you’re still making 13.8 per cent (margin).”
The head of the provider, which claims to be the “fastest growing vocational training provider in the UK”, was also questioned about his pay and dividends.
He said: “Over last four years we’ve declared one dividend which was £3 million, which equated to about 15 per cent of distributable profits.”
Mr Syddall added: “I set this business up from nothing and now we have 750 people. The other thing we have done over the last three years, 40 per cent of post-tax profits have gone into social impact programmes, which helped thousands of young people back into employment.
“From every £1 I’ve taken out in the last three or four years, I’ve put £2 back to helping other people who have not been as lucky as me.”
He then confirmed that £75,000 is his basic salary.
Select committee member Brian Binley MP, who has set up two companies, said: “We have never got anywhere near the profit levels you are talking about.
“Quite frankly that much money made out of the business of your kind is a rip-off.”
He also added: “I do not see when you’re a large employer of people that you can make that sort of money.”
Mr Syddall said: “The year we are talking about that profit level was made was 2009/10. We didn’t set the rates.”
However, Mr Binley jumped in to ask: “So you overcharged?” before Mr Syddall said: “No we didn’t set the rates, so the rates were standardised.”
Again, Mr Binley asked: “You were overpaid?”
I set SkillsFirst up because I thought there was a gap in the market.”
This time, Mr Syddall said: “Or the state paid too much money, because it didn’t recognise that there are efficiencies in this kind of delivery model.
“Again, I don’t think there are many businesses out there who have put £6.5 million of its own money over the last three years supporting programmes that have helped thousands of people.”
Mr Binley said: “That’s great, but there aren’t many apprenticeships out there making the sort of bottom line that you’re making.
“You can understand why people are suspicious though, can’t you?”
The focus of the session shifted to Skillsfirst Awards, an awarding body set up by Mr Syddall, and if it represented a conflict of interests.
He said: “It is no different for instance than City & Guilds and City & Guilds for Business, who deliver Asda. It is no different than EdExcel and Pearson in Practice.”
Mr Syddall said that he was “encouraged to broaden the awarding body market by the government” before adding: “I set SkillsFirst up because I thought there was a gap in the market.
“That is now a very successful awarding body. It deals with 30 organisations, including ourselves.
“There are no rules from Ofqual to say we can’t do it. There is very robust and rigorous conflicts of interest policies that we adhere to.”
Mr Syddall also confirmed that the Skills Funding Agency doubled its contract with Elmfield Training to £40m half way through 2010/11 due to the volume they were delivering, rather than the time period they were operating to.
The topic moved to Elmfield Training’s satisfactory Ofsted grade, which Mr Syddall defended, but it was not long until the conversation moved back to the subject of the provider’s dividends.
Mr Binley said: “I really do want to make sure that the taxpayer is getting real value for money.”
The MP told the session that as well as the profit and the profit margin, a total of £6.5 million went into taxation and dividend, before asking where it went.
Mr Syddall confirmed the dividend was £3 million after tax, and that there are four shareholders in Elmfield Training Ltd, but that he holds 95 per cent of shares.
Mr Binley: “I think it’s right and proper to get that as evidence because it does give us an idea of whether the taxpayer is getting value for money.
“I understand your side of it, but I think there’s a doubt in terms of the amount of money that you made in that year.”
Mr Bailey, towards the end of the session, asked about the financial situation of Skillsfirst Awards.
Mr Syddall confirmed that, as shown in their last published accounts, the firm made a loss.
However, for the following year, he said: “About a couple of million turnover but I’m not sure on profits. About £1 million.”
He then confirmed that he was the only shareholder of the firm.