Troubled Redcentric back in the black after £20m misstatement
TROUBLED IT services business Redcentric reported it was back in the red for the second half of the year following a forensic investigation into accounting misstatements which forced its CFO out.
Revenue for the half year to 20 September was up 2% to £53m, and pre-tax profitability returned.
Redcentric made £320,000 in pre-tax profits compared to a restated loss of £2.5m in the same period in 2015.
During the year, a new Hyderabad office in India has been opened with a 250 seat capacity, doubling the potential size of the operation, and management is confident that it can put its accounting troubles behind it.
Misstated accounting balances in the group’s balance sheet were discovered at the beginning of November, leading to the departure of the former CFO.
The company swiftly brought in a replacement Peter Brotherton who has made “good progress” on its remedial plans, embarking on a forensic review with Nabarro and Deloitte.
The internal review was in relation to the interim results for the six months ended 30 September 2016. Redcentric found that the cumulative overstatement of net assets and pre-tax profits up to 30 September 2016 is approximately £20.8m. Following the restatement, net debt was at £42m for the eight month period to 30 September.
Costs relating to misstatements have reached £1m already, said the firm.
Chris Cole, chairman, commented: “It has clearly been a very difficult period for the Company. A great deal of work has been carried out – supported by our independent external advisors – to complete and consider the conclusions of the forensic review, establish a remedial plan of action and report these interim results.
“While there is obviously more work to be done, we have made some important steps forward with the appointment of a strong and experienced chief financial officer who is leading the ongoing strengthening of our internal processes. With the welcomed support of our banks, clients and colleagues, we are focused on taking a more robust business forward.”
Fraser Fisher, chief executive, added: “The past few weeks have obviously been very challenging. Through that time though, the Company has continued to deliver excellent services and support for its clients. I would like to thank our Redcentric team for their hard work and dedication toward that work.”
“Our priority now is to take the necessary actions required to strengthen the business. With the opportunities ahead in our market – reflected by the strong sales pipeline and 38 client wins in the period – we are focused on taking a stronger, sustainable business forward.”
