Last checked at 7 Nov 2016 07:00
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 +44 (0)1423 850 000
Fraser Fisher, Chief Executive Officer
Tulchan +44 (0)20 7353 4200
James Macey White / Matt Low
Numis Securities Limited - Nomad & Joint Broker +44 (0)20 7260 1000
Simon Willis / Oliver Hardy / Ben Stoop
finnCap Ltd - Joint Broker +44 (0)20 7220 0500
Stuart Andrews / Rhys Williams
MXC Capital Markets LLP - Financial Adviser +44 (0)20 7965 8149
Marc Young
Redcentric plc
Central House
Beckwith Knowle
Harrogate HG3 1UG