Rollercoaster ride for IT firm’s share price as investigation reveals extent of damage

IT SERVICES business Redcentric has revealed that the overstatement of its assets was more that originally suspected, leading to a plummeting share price yesterday.

On its announcement that the cumulative overstatement of net assets and profits after tax up to 30 September 2016 is approximately £20.8m, its share price dropped 17%, but bounced back by the end of the day. It closed at 78.5p per share yesterday.

Priot to its initial announcement, the company’s share price had reached 150p. Since then it has been struggling to recover.

In November Redcentric launched a forensic view of its accounts after accounting misstatements were found. Chief financial officer Tim Coleman resigned the same day.

The Harrogate-based company said that £5.9m of the misstatement was in the six months ended 30 September 2016.

The remaining £14.9m misstatement relate to periods prior to and including the year ended 31 March 2016. It did say that to date there has been no evidence of theft and the misstatements are attributable to profit overstatement over a number of years with revenues being overstated and costs understated in “broadly equal proportions”.

Net debt was still “materially higher” than expected. As of 31 March 2016, net debt was £37.8m and as at 30 September 2016 net debt was £34.4m.

Peter Brotherton has been appointed as chief financial officer and Julian Llewellyn as interim CFO at Redcentric’s headquarters in Harrogate. Mr Brotherton is leading a full review of the entire finance function.

A number of initial improvements have already been made including changes to billing and credit control management systems and processes.

The company currently expects to report for the six months ended 30 September 2016 revenue of approximately £53.0m.