IT SERVICES provider Redcentric overstated profits by more than £20m for the first half of the year, an independent inquiry has found.
As a result of the misstatements, the board has appointed Peter Brotherton as chief financial officer and Julian Llewellyn as interim CFO. Brotherton is carrying out a review of the finance function and plans to restructure it.
The Harrogate-based company hired Deloitte and law firm Nabarro to carry out an independent review after the audit committee uncovered accounting anomalies in the interim results for the six months to 30 September 2016.
The company shocked the market last month when it announced that a routine re-examination of its accounts had “discovered misstated accounting balances in the group’s balance sheet”, causing its share price to plummet more than 50% from 149.6p to 71.5p.
Its former CFO Tim Coleman was promptly placed on “garden leave”.
The inquiry found that there was “no evidence of theft”, but that the misstatements were due to “profit overstatement over a number of years with revenues being overstated and costs understated in broadly equal proportions”, the company said on Thursday.
As a result of the restatement, net debt for the year is “materially higher than originally reported”. As at 31 March 2016, net debt was £37.8m and at 30 September 2016 net debt was £34.4m.
The IT services provider avoided breaching its banking covenants by securing waivers from its banks so that it is fully compliant with its lending requirements, it said in a statement.
Redcentric has also made some “initial improvements” to its billing and credit control management systems and processes.
The company, which will report its interim results before 31 December 2016, expects to report around £53m in revenue and around £9.1m pre-tax profits for the six months to 30 September 2016.
Shareholders will not receive an interim dividend in light of the restatement.
Shares were down 2.37% to 72 pence in early morning trading.