Eddie Stobart suspends trading after £2m accounting error
The UK logistics company discovered inflated operating profits, following an investigation led by chief financial officer Anoop King.
UK logistics company Eddie Stobart has suspended its stock trading, following an investigation which found a £2m accounting-based error in its 2018 accounts.
This development comes after the appointment of chief financial officer Anoop King in April and his investigation into the company’s finances. King’s review found that the company’s 2018 operating profits were inflated by roughly 4%.
This review was conducted with the support of the Group’s auditors, prompting the Board to apply “a more prudent approach to revenue recognition, re-assessing the recoverability of certain receivables, as well as considering the appropriateness of certain provisions.”
In a letter to stockholders, the company also announced that its 2019 profits would be significantly lower than anticipated. When trading was suspended, shares were going for 70p – a far cry from the £1.60 they fetched when trading opened in early 2017.
Change in leadership
Eddie Stobart has not publicly announced what the accounting error was that led to this mistake, but its impact has been felt across the company and its assets. Former chief executive Alex Laffey has stepped down from his position, leaving Sebastien Desreumaux of iForce and Contract Logistics to pick up the pieces.
Moving forward, Eddie Stobart’s board has “full confidence” in its management team, although it does not yet know what the full extent of its accounting mistake is.
In its July half year trading statement, the company said, “The likely cumulative effect on the results for the year ended 30 November 2018 will be to reduce adjusted EBIT by approximately £2m.
“Although the 2019 adjusted EBIT impact of these matters is £1.6m we expect to deliver a full year result in line with the Board’s expectations. Further details will be included in our Interim Report.”
These six-month interim results were due to be published on 29 August but have now been delayed until early September. As the company’s adjusted EBIT changes, its dividend policy is also set to be reviewed.