PwC to examine accounts at Carter & Carter

A leading provider of government training courses is at the centre of questioning over its numbers, in one of the most dramatic corporate accounting issues of recent years.

Following the death of founder Philip Carter in a helicopter accident earlier this year, the company, Carter & Carter has announced a review into how it booked revenues.

Its auditors Pricewaterhouse-Coopers is looking at the accounts to determine the issues. Carter & Carter admitted earlier this month it could not assess its financial state and trading in its shares was suspended.

After the company realised its results for the year to 31 July 2007 were likely to be ‘materially lower’ than expected, it enlisted PwC’s help.

Carter & Carter said it was ‘assessing the recoverability of certain current assets as at 31 July 2007, together with the accuracy of certain other revenue streams in the business’.

A Carter & Carter spokeswoman confirmed that the issue of early recognition of contracts would be on the agenda for PwC.

Government training contracts are normally granted a year at a time, but payments are made only month by month. The timings of the payments and when they were recognised on the books will come under close scrutiny.

Carter & Carter built a strong presence in providing government-funded training with a number of acquisitions over the past three years.

But from a high of £12.73 on 3 April, the company’s share price steadily decreased until the end of June. It nosedived after Carter & Carter advised the market that it had experienced ‘a period of change and significant underperformance’ after the death of its founder.

On 3 July the share price stood at £2.80 before slumping to 52p after another profit warning on 13 July.

Since then, the company has been assessing its results for the 12 months ended 31 July 2007 in conjunction with its auditors and newly appointed divisional management.
Carter & Carter said its management accounts for June had revealed that its performance in construction training was lower than expected. It also anticipated a lower level of achievers in July across its apprenticeship programmes.

Carter & Carter said these factors would cut profits by around £3m.

The company has been forced to suspend its shares from the AIM exchange and FD John Green has stepped down.

Green, a chartered accountant who spent seven years at PwC, resigned
as FD with immediate effect but agreed to stay with the group until a successor was found. In the interim, Carter & Carter will be looking to appoint an acting FD.

Carter & Carter also said that senior consultants had been engaged from outside the accountancy profession to strengthen its finance function.

The company is still locked in discussions with its lenders after opening negotiations at the beginning of the month with regard to its financial position and a renegotiation of its bank facilities.

‘Shareholders will be kept informed of further developments in due course,’ the company added.