Utilitywise Swings To Loss After Changes In Revenue Recognition Policy

LONDON (Alliance News) - Utility cost-management consultancy firm Utilitywise PLC on Thursday swung to a full year loss after a change in accounting policy regarding revenue recognition resulted in a "material" impact on its results, leading to a delay in publication.

For the year ended July 2017, Utilitywise sunk to a GBP31.4 million pretax loss from a GBP1.4 million profit the year prior. This was primarily driven by GBP20.9 million in exceptional costs compared to a GBP3.2 million exceptional gain the year prior. The costs were related to impairments and restructuring costs.

On an adjusted basis - excluding exceptional items - Utilitywise also fell to a GBP8.5 million pretax loss. This was compared with a GBP1.6 million adjusted pretax profit the year prior. Revenue remained broadly unchanged at GBP67.8 million.

The company said that the adjusted pretax loss swing was attributable to a GBP6.0 million non-cash negative adjustment "due to the adjustment in under-consumption rates on live contracts less than GBP50,000 as at July 31, 2016 to the financial year leakage rate," the company said.

Utilitywise looked to review its revenue accounting policies after discovering its procurement contracts were not assessed at the different levels of underconsumption at different value levels. In other words, "larger contracts, on average, appear to under-consume by greater proportions than smaller contracts," the company said.

The company reported that the cash flows and the economic performance were not affected due to the accounting policy changes. The cash recorded was GBP10.1 million on July 31 compared to GBP12.2 million prior year.

Utilitywise did not declare a final dividend for financial 2017.

"The past 12 months have been difficult for the group and all of its stakeholders, not least for its shareholders. The board has been dealing with a number of challenges, including increasing the transparency of its capital structure, dealing with contract under-consumption issues, primarily as a result of legacy issues from earlier years, and undergoing a fundamental review of the group's revenue recognition policies," said Non-Executive Chairman Simon Waugh.

Utilitywise emphasised it had experienced continued growth in the first half and there are expectations to grow in second half. There was, however, a "somewhat destabilising effect on several key stakeholders of the group, including colleagues in the short-term" due to the delay in the 2017 year audit.

"The board remains confident of the long-term growth prospects of all parts of the business and is working to ensure that the impact on the business is a short-term one. However, it is now expected that the trading and, therefore, profit of the group as whole in the second half of the financial year will be below expectation and will be lower than the first half of the year," said Director Richard Laker.

Today the company also announced its shares had been lifted from trading suspension. Shares in Utilitywise were 11% down at 36.50 pence on Thursday.