A £60M GOODWILL impairment charge has led to a £70m loss for RSM Tenon in its interim results.
The listed firm, which recently saw CEO Andy Raynor and chairman Bob Morton leave the business, saw revenues fall by 9.3% to £107.8m for the half year ending 31 December 2011. Pricing pressures and transaction-based services behind its expectations led to the fall in revenues.
An £11.4m loss was posted for the six months, compared to an £8.5m profit for the same period a year earlier.
The firm took a goodwill charge of £60.7m, and also restated previous accounts to reduce prior-year pre-tax profit by £12.1m, due to "significant errors and change in accounting policy", a statement to the stock exchange said.
The restatement, linked to its accounting policy regarding referral fees, saw 2010/2011 year revenues reduced to £245m from £249m. Its operating profit fell to £5m from £13.9m, while overall profit fell to £683,000 from £7.5m.
Other issues included an error in recording employee bonuses that resulted in a reduction in the 2010/2011 profits by £3.7m, and errors relating to the amount recoverable on contracts.
"Our underlying business performance has been resilient in the face of a tough market environment," said RSM Tenon CEO Chris Merry.
"We have a clear action plan to drive near-term profitability and cash generation...RSM Tenon is fundamentally a sound business."
With too high a cost base following its acquisitions of RSM Bentley Jennison and a division of Vantis, a programme has been introduced to reduce headcount by 10%, and "rationalise" certain offices. Employment cost savings of £14m a year are predicted to come out of the headcount reduction. The upfront cost of the plans will be £6m.
Auditors PwC have issued a going concern warning against RSM Tenon. The firm is waiting for documentation to go through for an £88m banking facility with Lloyds Banking Group - with heads of terms agreed in principle.
It is really disappointing to see a major firm having to restate its own accounts by such material amounts and in so many different areas. This must reflect badly on the Tenon brand.
It also reflects badly on the auditors who signed off on the PY numbers.
The whole preofession is reeling from this.
Posted by: Mitch Russell, 29 Feb 2012 | 11:29
Not to berate Andy Raynor as he was a forward thinking and good CEO, and in my view martyred for the shareholders, but £60m of goodwill should never have been capitalised. Goodwill walks out of RSM Tenon's rented doors every day and in a people business, people follow people.
Unfortunately it's not as simple to write the liabilities off because, unlike the assets, the bank loan stays put.
The problem is, business as usual. Merry has his work cut out.
Posted by: Jim A, 29 Feb 2012 | 14:43
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