Redcentric said an internal audit review in relation to its interim results has discovered misstated accounting balances in the group’s balance sheet.
The Board has commenced a forensic review of the Group’s current and historic balance sheets which will delay publication of its interim results (originally scheduled for 14 November).
The work to date has identified that audited accounts for previous years are likely to need to be restated, resulting in some write down in historic profits.
Current indications are that all issues relate to prior periods.
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 Board believes from the information available to date that the impact of correcting these cumulative historic accounting misstatements would result in a need to reduce net assets by at least £10 million. The net debt guidance announced in the pre-close trading update is now believed to be unreliable. The Board now believes net debt at the half year was approximately £30 million.
The Board also believes that 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.
The Company has served notice on its CFO, Tim Coleman, and placed him on garden leave with immediate effect.
Mr. Coleman resigned with immediate effect as a Director of the Company on 6 November 2016. The Board anticipates making an external interim appointment of a replacement CFO.
A further announcement will be made as appropriate and the Company will provide a revised date for the publication of its interim results in due course.
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