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 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
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
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
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
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.
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