Accounting misstatements

RNS Number : 4407O

Redcentric PLC

07 November 2016

 

7 November 2016

Redcentric plc

("Redcentric" or the "Company")

Accounting misstatements

Redcentric plc (AIM:RCN), a leading UK IT managed services provider, announces that an internal review by the Company's audit committee in relation to the interim results for the six months ended 30 September 2016 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.

Chris Cole, Chairman of Redcentric, commented:

"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.  The indications are that these accounting issues relate to prior periods and that the current levels of new business sales by the Company are as expected."

This announcement contains inside information.

Enquiries:

Redcentric plc                                                                        [phone]

Fraser Fisher, Chief Executive Officer

Tulchan                                                                                   [phone]

James Macey White / Matt Low

Numis Securities Limited - Nomad & Joint Broker             [phone]

Simon Willis / Oliver Hardy / Ben Stoop

finnCap Ltd - Joint Broker                                                     [phone]

Stuart Andrews / Rhys Williams

MXC Capital Markets LLP - Financial Adviser                      [phone]

Marc Young

Redcentric plc

Central House

Beckwith Knowle

Harrogate HG3 1UG

 

END

 

 

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