News
7 Nov 2016 03:30pm

Accounting misstatements at Redcentric prompt CFO exit

An internal review of Redcentric’s interim results for the six months ended 30 September has discovered misstated accounting balances in the group’s balance sheet, prompting the resignation of the company’s CFO

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Caption: Previous accounts likely to be restated, causing write down in historic profit

A forensic review of the group’s current and historic balance sheets has commenced, following the discovery made by the audit committee.

The IT services provider added that the work to date has identified that audited accounts for previous years are likely to be restated, resulting in some write down in historic profit.

According to Redcentric, current indications are that the accounting issues relate to prior periods and that the current levels of new business sales by the company are as expected.

Management's focus remains on working with our motivated staff to provide critical IT services to our customers

Chris Cole, chairman of Redcentric

“New business sales and recognition of those sales into revenue over the six months ended 30 September 2016 have been in line with management's expectations,” the company said in an announcement posted on its website.

The board added that judging from the information available to date, the impact of correcting these cumulative historic accounting misstatements would result in a need to reduce net assets by at least £10m.

The net debt guidance announced in the pre-close trading update is now believed to be unreliable, the announcement added.

Redcentric now believes net debt at the half year was approximately £30m, while the underlying net debt position at 31 March 2016 was materially higher than as reported and thus the business has reduced its underlying net debt in the six months to 30 September 2016.

The accounting adjustments arising will result in a recalculation of the banking financial covenants, which will take some time to complete, according to Redcentric.

The forensic review will delay publication of the company’s interim results, which were originally scheduled for 14 November.

Chris Cole, chairman of Redcentric, said, "The board is absolutely focused on completing the internal review to resolve the situation in a timely manner and release the company's interim financial statements at the earliest time. Management's focus remains on working with our motivated staff to provide critical IT services to our customers.”

Tim Coleman, CFO of Redcentric, resigned with immediate effect as a director of the company on 6 November 2016 after being placed on garden leave.

The board said it anticipates making an external interim appointment of a replacement CFO and a further announcement will be made in due course along with a revised date for the publication of the company’s interim results.

Sinead Moore

 

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