Redcentric parts company with CFO after accounts misstated

IT managed services provider Redcentric has parted company with its finance director and is calculating its banking covenants after its accounts were found to have been misstated.

The company said it would probably have to reduce current net assets by £10m and write down some historic profits after misstated accounting balances were discovered in the group's balance sheet.

But the AIM-listed group assured that a forensic review of its balance sheets by the audit committee had indicated all of the problems related only to previous periods and that trading for the six months to 30 September has been in line with targets, with levels of new business and conversion into revenue as expected.

With guidance given in September's pre-close statement now felt to be unreliable, underlying net debt levels at the 31 March year end was likely to have been "materially higher" than the £25.3m that was reported.

Current net debt is now calculated by the audit committee to be roughly £30m.

"The accounting adjustments arising will result in a recalculation of the banking financial covenants, which will take some time to complete," the company said, with interim results originally scheduled for 14 November being pushed back until an internal review is completed.

Notice has been served on chief financial officer Tim Coleman, who has been placed on garden leave with immediate effect.

Chairman Chris Cole said: "The board is absolutely focused on completing the internal review to resolve the situation in a timely manner and release the company's interim financial statements at the earliest time. Management's focus remains on working with our motivated staff to provide critical IT services to our customers. The indications are that these accounting issues relate to prior periods and that the current levels of new business sales by the company are as expected."

Shares in the company plummeted 71% on Monday morning to 43.63p.