The company admitted yesterday it had discovered accounting discrepancies in its 2000 and 2001 accounts, resulting in £21m of unforeseen charges.
As a result, Guardian iT’s operating profit for the year before exceptional items and goodwill amortisation is expected to be between £11.5m and £12.5m instead of the £13.0m previously stated. The mistakes are expected to cost the company at least £6.5m.
In light of these developments chairman Richard Raworth has resigned and the company will be cutting 70 jobs to save £3m. Guardian iT has also abandoned plans to open a New York recovery centre.
The company has been in discussion with five banks regarding a stand-still agreement on their debts. The company owes £110m to the banks and could be in breach of its debt covenances once the 2001 audit is completed. According to Guardian iT, the banks have been informed of the situation.
Company auditors PricewaterhouseCooper are currently working on the 2001 audit. A spokesman for Guardian iT said there was ‘no suggestion’ PwC would not be retained beyond the current audit due to be completed in April.
The company said it was too early to estimate the full extent of its losses.
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