(Adds company comments, earnings, share price drop)
By Huw Jones and Samantha Machado
LONDON, March 12 (Reuters) - Galliford Try
overstated its net assets by 94 million pounds ($120 million) in
2018 and its accounts have been restated, Britain's audit
watchdog said on Thursday after its latest inquiry into the
construction industry.
Shares in Galliford, which also reported wider first-half
2019 losses on Thursday, were down 15% at 126.24 pence by 0958
GMT.
The Financial Reporting Council (FRC) said it had raised a
number of issues with the company, including the recognition of
revenue on construction contracts, and the classification of
certain cash flows in its cash flow statement.
"The FRC found that Galliford Try overstated its revenue in
2018, which the company has now corrected," said David Rule, the
FRC's executive director of supervision.
"We will continue to hold companies to account when they do
not comply with the requirements of relevant financial reporting
standards," Rule said.
Galliford said it has worked closely with the FRC and that
the watchdog had concluded its review as a result of action
taken by the company. The FRC confirmed its inquiries had
concluded after corrective action by the group.
Its Chief Executive Bill Hocking told reporters the
restatement related to a "technical point" regarding how much
revenue to recognise from a loss-making contract in Aberdeen.
The FRC, which spotted the discrepancies during routine spot
checks, said the company should not have recognised an 80
million pound claim recoverable from the customer for a Scottish
road contract.
The total effect of all the errors identified was to
overstate net assets by 94.3 million pounds at June 30, 2018,
the FRC said.
In its annual report Galliford said BDO will replace PwC as
auditor. PwC could not be immediately reached for comment.
Galliford, which recently sold its residential units to
Vistry Group, formerly known as Bovis Homes, said on
Thursday its pre-exceptional pretax loss widened to 5.6 million
pounds in the first half from 2.2 million pounds a year before.
The group, which helped to redevelop the Wimbledon tennis
venue, launched a review of its construction business last year
as part of its turnaround plan.
That led to the loss of 350 jobs as it focused on its core
strengths in building, water and highways.
The FRC is also scrutinising contracts at builder Carillion,
which collapsed in 2018. The watchdog expects an outcome from
its investigation into Carillion's auditor KPMG around year-end.
Builder Kier has also amended elements of past accounts
after intervention by the FRC.
($1 = 0.7808 pounds)
(Reporting by Huw Jones; Editing by Sinead Cruise, Mark Potter
and Jan Harvey)